ICTSI starts bond swap offer

Port terminal operator International Container Terminal Services Inc. launched a $450-million bond swap offer to stretch debt maturity and match it with long-term port infrastructure projects.

ICTSI offers to redeem senior notes maturing in 2020 and replace them with new debt notes due in 2025 to be taken out of the $1-billion medium-term notes (MTN) program of wholly owned ICTSI Treasury BV.

On Friday, ICTSI said the size of the MTN was increased to $1 billion from $750 million.

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

Citigroup and Credit Suisse were mandated as joint dealer managers and solicitation agents.

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

“We have, in effect, launched a liability management exercise,” Consing said, adding that the first objective of this bond exchange program was to extend the duration of ICTSI liabilities to match the time horizon of major projects. Recently, 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 [its] redemption profile for principal debt notes,” Consing said. For the next few years, ICTSI is facing debt maturities of less than $50 million a year. while for 2017 to 2019, there will be no maturing debt. By 2020, ICTSI’s $450 million notes, which is the subject of the offer, will fall due.

“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.

“It will give them (bondholders) an opportunity to lock in the cash gains on their bond holdings and be able to invest it in the same credit at par with a yield pick-up,” he said.

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.