Ayala offering 10-yr bond worth P10B to beef up cash position

MANILA, Philippines—Conglomerate Ayala Corp. is returning to the local bond market with the public offering of as much as P10 billion in 10-year innovative bonds.

Based on a disclosure to the Philippine Stock Exchange, Ayala plans to issue at least P6 billion of these “multiple puttable” retail bonds with an option to increase by P4 billion in case of strong demand.

The “put” feature of the offering allows investors to sell their holdings back to Ayala before the bond reaches maturity. The “put” option is given on the fifth and eighth year.

The put option on the fifth year is for up to 10-20 percent of the principal amount of the bonds held while that on the eighth year is for up to 80-100 percent of the principal amount of the bonds held, Ayala said in the disclosure.

The bonds, which will be offered to retail investors, will be issued in scripless form in denominations of at least P50,000 each and in multiples of P10,000 thereafter. They will be issued at 100 percent of face value.

Ayala has appointed BPI Capital Corp. as the issue manager.

The interest rate will be based on a spread over applicable PDST-R2 benchmark.

This issuance is longer than the similar puttable bonds issued by Ayala in April last year, its first domestic bond foray in three years.

Ayala last year issued seven-year bonds with a one-time put option on the fifth year. It was the first time that peso-denominated instrument with “put” option was offered to the public.

Proceeds from the offering are expected to beef up Ayala’s net cash position which stood at P29 billion as of end-2010. The funds can be deployed to expand existing businesses, acquire new ones or buy back shares from the stock market if opportunities arise.

Ayala has announced that for 2011, it had set aside a group-wide capital expenditure budget of P79 billion, 21 percent higher than year-ago level, citing its “optimism on the country’s renewed growth prospects.”