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Ayala plans issue of perpetual bonds

/ 04:02 AM October 23, 2019

Conglomerate Ayala Corp. may return to the overseas perpetual bond market for the first time since its pioneering fixed-for-life notes issuance in 2017.

Its wholly owned subsidiary, AYC Finance Ltd., has mandated HSBC as sole global coordinator and BPI Capital Corp., Credit Suisse Credit Suisse Ltd., HSBC, J.P. Morgan Securities plc and UBS AG Singapore as joint lead managers and joint bookrunners for the prospective offering.

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A 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.

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This is in contrast with other perpetual bonds which have coupons or dividend rates that increase, thus encouraging the issuer to redeem them.

The proposed issuance is an offering of USD-denominated fixed-for-life (nondeferrable) senior perpetual notes under Regulation S, which provides a US Securities and Exchange Commission-compliant way for United States and non-US companies to raise capital outside US soil.

When AYC first raised $400 million from this instrument in 2017, this marked the first fixed-for-life corporate debt deal out of Southeast Asia.

The perpetual notes carried an annual coupon of 5.125 percent.

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

The landmark $400-million fixed-rate perpetual bond issued by Ayala Corp. in 2017 bagged the “Philippine capital market deal for 2017” citation from Thomson Reuters’ International Financing Review Asia (IFR Asia).

The publication cited how the Ayala deal had drawn strong demand from both offshore investors and domestic institutions with ample dollar liquidity.

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Proceeds were meant to refinance maturing US dollar obligations and to fund investments.

The deal would enable it to pursue new opportunities, expansions and acquisitions.

The Ayala group is not yet ready, however, to discuss details of the prospective perpetual securities offering.

“We just asked the banks to explore for now,” said one Ayala official.

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

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