Conglomerate San Miguel Corp. (SMC) is raising up to P20 billion from a fresh offering of retail bonds, proceeds from which will be used to retire part of the firm’s US dollar-denominated debt.
The proposed bond issuance has obtained a “PRS Aaa” rating with a “stable” outlook from Philippine Rating Services Corp. (Philratings), the highest rating in the scale of the local credit-rating watchdog. Securities rated “PRS Aaa” are deemed of the highest quality with minimal credit risk. The borrower’s capacity to meet its financial commitment on the obligation is deemed “extremely strong.”
The bonds are part of San Miguel’s three-year shelf registration of up to P60 billion. The base offer is P15 billion but SMC has the option to upsize by another P5 billion to cover excess demand. Shelf registration allows an issuer like SMC to register and sell under the same prospectus and other regulatory filing requirements a certain volume of securities that the issuer does not intend to use up right away.
The Securities and Exchange Commission (SEC) gives the issuer with securities under shelf registration a three-year window to use up its leeway. This allows the issuer to complete all the tedious paperwork and thereby lay the groundwork for a future issuance and immediately go to market as soon as conditions are favorable.
For its part, Philratings said the triple-A rating was assigned to SMC’s proposed offering given the following key considerations: ample cash flow generation that is seen to strengthen further as the company’s energy and infrastructure projects are completed; manageable and improving debt position, especially considering the capital-intensive nature of its recent projects in energy and infrastructure; adequate liquidity and financial flexibility; solid market position and substantial track record of its subsidiaries, backed by stable demand and boosted by an improving economy, and seasoned management team with sound strategies.
SMC is one of the biggest conglomerates in the Philippines with diversified businesses ranging from beverages, food, packaging, fuel and oil, energy and infrastructure. Its subsidiaries either enjoy a dominant or strong and leading market position.