Ayala raises $300M via equity-linked bonds

Fernando Zobel de Ayala . INQUIRER FILE PHOTO

MANILA, Philippines—Ayala Corp. has raised $300 million from the sale to institutional investors of low-yielding bonds that investors can exchange for shares of property unit Ayala Land Inc.

The five-year bonds were priced to yield only 0.5 percent per annum but holders can exchange these for ALI shares at P36.48 per share—a 20 percent premium to market price —at any time on or after June 11 until the 10th day prior to maturity date. In effect, the conglomerate rode on strong investor confidence on ALI to get cheap financing.

The offering is the first equity-linked international issuance by a Philippine issuer in the past two years. It also achieved the lowest cost of financing across Asia’s emerging markets this year.

During Ayala’s annual stockholders meeting on Friday, the conglomerate’s president Fernando Zobel de Ayala reported that this equity-linked offering was oversubscribed by 2.5 times the base offer.

ALI’s shares fell by around 3 percent in early trade on Friday as investors feared dilution after the deal was announced. Ayala’s chief finance officer Delfin Gonzalez Jr., however, explained in a media briefing that this would not result in dilution of shares held by the public because the ALI shares to be exchanged would come from shares already owned by Ayala Corp.

Ayala currently holds close to 49 percent of ALI. Assuming that all $300 million bonds were exchanged, Gonzalez said the conglomerate’s stake would go down to 46.5 percent, remaining as the single biggest shareholder in the property firm.

The bonds will be exchangeable at any time to ALI shares on or after June 11 this year up to the close of business on the 10th day prior to the maturity date. The bonds will initially be exchangeable at P36.48 per Ayala Land share representing a premium of 20 percent over Ayala Land’s closing price on April 10, bondholders will have the right to require Ayala to repurchase for cash all or part of their bonds at a repurchase price equal to 100 percent of the principal amount of the bonds.

Starting May 2, 2017, the company can redeem the bonds if the closing price of Ayala Land shares for any 30 consecutive trading days is at least 130 percent of the exchange price.

The conglomerate intends to use the net proceeds from the issue of the bonds for general corporate purposes.