Port terminal operator International Container Terminal Services Inc. has raised $450 million from an overseas issuance of perpetual bonds at the lowest coupon rate ever achieved by a Philippine issuer for this kind of securities.
ICTSI’s perpetual bond issue was priced at par to yield 5.5 percent per year, the company said on Wednesday.
This deal marked ICTSI’s second tranche of senior perpetual capital securities, the first was priced on Jan. 22. This is now the single largest debt issuance deal for ICTSI, so far the only Philippine issuer to have offered US dollar senior perpetual securities in the international debt capital markets.
In a statement, ICTSI vice president and treasurer Rafael J. Consing Jr. said: “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 it to further enhance its capital structure to match its long-term port concessions, which have maturity of up to 2055.
ICTSI operates 30 common user container terminals in 20 countries.
While the issuance technically has no maturity, ICTSI has the option to call or redeem the bonds by 2021 or otherwise pay a “step-up” rate. The synthetic maturity is 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 a year on May 5, 2021, unless otherwise redeemed by ICTSI.
Fund managers took up 59 percent of ICTSI’s issuance; high networth investors, 30 percent and banks, 11 percent.
Philippine-based investors took 14 percent of the issuance; the rest of Asia, 70 percent and European investors, 16 percent.
Citigroup Global Markets Ltd, Credit Suisse Securities (Europe) Ltd. and Standard Chartered Bank were the joint lead managers.
“ICTSI has once again demonstrated its ability to raise cost-effective funding from the international bond market. This benchmark issue generated very strong demand from investors and established a new milestone for the perpetual capital securities sector in the Philippines. This highlights the potential opportunities available for other Philippine corporates,” said Aftab Ahmed, CEO at Citi Philippines.