Ayala issues landmark $400M perpetual notes

Ayala Corp. chair, Jaime Augusto Zobel de Ayala

The country’s oldest business house Ayala Corp. debuted on the overseas perpetual bond market with the issuance of $400 million landmark senior notes, the first fixed-for-life corporate debt deal out of Southeast Asia.

The perpetual notes, issued by wholly-owned unit AYC Finance Ltd. and guaranteed by the 183-year-old conglomerate, carried an annual coupon of 5.125 percent for life with no step-up or resetting deal.

“This successful launch of fixed-for-life notes provides us with the financial flexibility to manage our balance sheet and diversify our sources of capital. We are grateful for the continued support we have received from our investors that is clearly reflected in this issuance,” Ayala Corp. chair and chief executive officer Jaime Augusto Zobel de Ayala said in a press statement on Thursday.

“Finding favorable conditions in a volatile credit market allows Ayala to optimize its average cost of funding while extending its debt maturity profile,” said Ayala Corp. chief finance officer Jose Teodoro Limcaoco.

Fixed-for-life perpetual issuance means the rate never changes: there is no resetting or step-up provision that could increase the cost of borrowing after the synthetic maturity period is reached.

“This is in contrast with other perpetuals which have coupons or dividend rates that step up, thus encouraging the issuer to redeem,” Limcaoco explained in a text message.

“This issue shows how strongly the investor community supports Ayala and our commitment to sustainable businesses and good governance. We are grateful for their support in helping us with this landmark transaction that provides us with permanent capital at a very attractive rate,” he added.

The landmark notes were priced lower by 50 basis points from the original guidance amid strong demand for the offering, which was more than five times oversubscribed relative to the base offer.

In terms of investor distribution, 19 percent of the order book was allocated to investors from the Philippines, 10 percent from Europe and the remaining 71 percent from rest of Asia.

By investor type, fund and asset managers gobbled up 67 percent of the issuance while banks took up 12 percent. Insurance and pension funds accounted for 7 percent while the private banks and other investors took up the remaining 14 percent.

The transaction is expected to settle on Sept. 13, 2017.

Hongkong and Shanghai Banking Corp. Ltd. (HSBC) acted as global coordinator for this issuance while Deutsche Bank A.G. (Singapore Branch), HSBC and J.P. Morgan Securities plc were the joint lead managers. BPI Capital Corp. and Chinabank Capital Corp. acted as the domestic lead managers.

Ayala Corp., one of the country’s largest conglomerates, has interests in real estate, financial services, telecommunications, water, power generation, industrial technologies, infrastructure, healthcare and education. Significant investee companies include Ayala Land, Bank of the Philippine Islands, Globe Telecom and Manila Water Co.