SMC seeks charter change

Conglomerate San Miguel Corp. seeks to amend its charter to flesh out plans to raise as much as P33.5 billion from the sale of a new series of preferred shares, proceeds of which will be used to refinance maturing debt.

In a disclosure to the Philippine Stock Exchange on Wednesday, SMC said it would like to amend its articles of incorporation so that series 1 preferred shares would consist of 300 million shares while series 2 preferred shares would consist of 1.91 billion shares.

The existing charter allows SMC to issue 1.1 billion preferred shares and 1.1 billion series “2” preferred shares.

Three years ago, SMC issued P80 billion worth of preferred shares, then the largest capital market foray in the country.

It listed on the local bourse 1.067 billion series 2 preferred shares that were sold to retail and institutional investors at P75 each.

By amending its charter, SMC wants the leeway to issue more preferred shares under series 2.

Last Tuesday, SMC obtained board approval to offer to the public 446.667 million in a new series of preferred shares at an issue price of P75 per share. The proposed new issuance of series 2 preferred shares will be done in up to three sub-series, based on the disclosure.

In a text message, SMC president Ramon S. Ang said proceeds from this capital market exercise would be used to refinance debt.

SMC is thus expected to refinance the earlier series of preferred shares issued in September 2012, which the conglomerate had the right to call or redeem on the third year.

The preferred shares are peso-denominated, perpetual, cumulative, non-participating and non-voting. SMC has the option to redeem these shares starting the 3rd, 5th and 7th year and every dividend payment thereafter or otherwise pay a higher rate in accordance with the step-up provision.

About 67.6 percent of the preferred shares taken up by investors in 2012 went to the sub-series with an annual dividend rate of 7.5 percent that carries a step-up rate in five years. This is listed under the ticker “SMC2A.”

This suggests that about P54 billion or 721 million of the preferred shares issued by SMC in 2012 will have to be addressed this year.

From its stable core food, packaging and beverage businesses, San Miguel has embarked on a diversification program in 2007 and since then gained a foothold in high-yielding industries including energy, fuel and oil, infrastructure, airlines and mining.