Tycoon Andrew Tan-led property developer Megaworld Corp. is eyeing to debut on the local bond market, setting a P30-billion three-year bond offering program to fund an expansion plan.
In a disclosure to the Philippine Stock Exchange Thursday, Megaworld said its board had approved this debt securities program with an initial issuance of fixed-rate bonds worth as much as P12 billion.
The base for the first tranche of the offering was set at P8 billion, but with an oversubscription option of up to P4 billion.
Megaworld has appointed BDO Capital & Investment Corp. as issue manager, lead underwriter and bookrunner for the bonds.
“The proceeds from the bonds will be used to fund the capital expenditures of the company,” the disclosure read.
BDO Capital president Eduardo Francisco said this would be Megaworld’s first time to tap the local bond market. “The past issues were (denominated in) offshore dollars,” he said in a text message.
The borrowing program will use the shelf registration window of the Securities and Exchange Commission (SEC), which allows firms to register and sell under the same prospectus and other regulatory filing requirements a certain volume of securities that the company does not intend to tap right away. In the event that the oversubscription option is not fully exercised, the unused portion will be made part of the remaining volume that will have to be sold within a three-year period.
Local credit watcher Philippine Rating Services Corp. (Philratings) gave Megaworld’s bond offering the highest rating of “PRS Aaa” with a stable outlook for the next 12 months. This suggests that the proposed bond would be of “highest quality with minimal credit risk” and the borrower’s capacity to meet its financial commitment “extremely strong.”
Philratings said the rating took into account Megaworld’s “ample liquidity, the company’s sound capitalization and high-quality management” as well as expectations that its growth strategy would significantly benefit from the continued positive performance of the country’s economic growth drivers.
“Cash from operations is expected to remain positive during the projected period 2016 to 2024, with funding for working capital and capital expenditures largely sourced from internally generated cash flows. Current ratio has been kept above 3x for the last five years (2011-2015), and will remain more than satisfactory for the forecast years,” Philratings said.
“Going forward, liquidity will be further bolstered by the increasing share of recurring rental income to revenues. Historically, coverage of operating expenses from rental income has ranged from 93.5 percent (2011) to 109.2 percent (2015),” it said.
Megaworld grew its net profit in the January to September period by 11 percent year-on-year to P9.27 billion as the property developer unlocked higher recurring earnings from the expansion of its commercial and office portfolio. Consolidated revenues rose by 5 percent in the same period to P35.26 billion. The company’s rental income also expanded by 15 percent year-on-year to P7.41 billion, pulling up the company’s bottom line.
As of Thursday, Megaworld was valued by the stock market at around P116.4 billion.