ICTSI rolls out $450M bond exchange program

MANILA, Philippines–Port terminal operator International Container Terminal Services Inc. launched a $450-million bond swap offer to stretch out debts and match them with long-term port infrastructure projects.

ICTSI has offered to redeem senior notes maturing in year 2020 and replace them with new debt notes due 2025 which will be taken out of the $1-billion medium-term notes (MTN) program of wholly-owned ICTSI Treasury BV. Last Friday, ICTSI disclosed that the ceiling MTN program has been upsized to $1 billion from $750 million.

The new notes for the debt exchange offer will be priced by September 11.

Citigroup and Credit Suisse were mandated as joint dealer managers and solicitation agents, based on an information sheet on the debt exchange offer.

In case ICTSI is unable to buy back the entire $450 million series of notes in full, the port operator is willing to issue new notes of at least $200 million to form a single series with the debt swap program. This means that ICTSI is willing to raise new money at an “opportunistic” basis, ICTSI treasurer Rafael Consing Jr. explained in a telephone interview.

“We have launched effectively a liability management exercise,” Consing said, adding that the first objective of this bond exchange program is to extend the duration of ICTSI liabilities to match the time horizon of major projects.

Recently, for instance, the concession held by ICTSI to operate the Manila International Container Terminal (MICT) was extended for another 25 years.

The second objective is for ICTSI to “proactively manage redemption profile for principal debt notes,” Consing said.

For the next few years, ICTSI is facing debt maturities of only less than $50 million per annum while for the 2017 to 2019, there’s no debt maturity at all. But by 2020, ICTSI’s $450 million notes will fall due and this is the subject of the exchange offer.

“So by offering to exchange those 2020 notes to 2025, we stretch the liabilities further,” Consing said.

The third objective noted was to better manage liabilities at the lowest possible cost, which was why ICTSI took the debt exchange route.

Asked what’s in it for bondholders to accept this bond exchange offer, Consing said: “It will give them an opportunity to lock in the cash gains on their bondholdings and be able to invest it in the same credit at par with a yield pick-up.”

ICTSI is adding a spread of 1.25 over the 113.25-114.75 bid/offer when these notes were launched.

Results of the bond exchange offer are scheduled to be announced by Sept. 12 for settlement by Sept. 17 this year.