PORT terminal operator International Container Terminal Services Inc. has raised $450 million from an issuance of perpetual bonds at the lowest coupon rate ever achieved for a perpetual securities issuance out of the Philippines.
ICTSI’s perpetual bond issue was priced at par to yield 5.5 percent per annum, the company announced on Wednesday.
This offshore securities deal marked ICTSI’s second tranche of senior perpetual capital securities, the first of which was priced on January 22 this year. This is now the single largest debt issuance deal for ICTSI.
In a press statement, ICTSI vice president and treasurer Rafael J. Consing Jr. remarked, “We are pleased with the success of the new issue of senior perpetual securities. This transaction, which forms part of ICTSI’s overall capital management strategy, achieves for us the twin objectives of lowering our cost of capital and maintaining significant reserve leverage capacity.”
The exercise brings additional liquidity for ICTSI and allows the multinational Filipino corporation to further enhance its capital structure to better match its long-term port concessions, which have maturities up to 2055.
While the perpetual issuance technically has no maturity, ICTSI has the option to call or redeem the bonds by 2021 or otherwise pay a higher or “step-up” rate. The synthetic maturity is thus five years.
For investors, perpetual securities function like dividend-paying stocks or preferred shares as interest is paid for as long as these are held by investors. They offer a predictable source of income for the holder.
The rate of distribution for the perpetual securities will be reset every five years and will increase by 2.5 percent per annum on May 5, 2021, unless otherwise redeemed by ICTSI.
By distribution, fund managers took up the bulk of ICTSI’s perpetual securities issuance accounting for 59 percent while high networth investors acting through private banks accounted for 30 percent. Banks accounted for 11 percent.
By geography, Philippine-based investors took up 14 percent of the issuance while the rest of Asia gobbled up 70 percent. European investors took up 16 percent.
Citigroup Global Markets Ltd, Credit Suisse Securities (Europe) Ltd. and Standard Chartered Bank acted as joint lead managers for the new perpetual securities issuance.