Homegrown fast food giant Jollibee Foods Corp. (JFC) is testing the offshore financial market for a potential fund-raising to address debt incurred for its $350-million acquisition of US-based global specialty coffee chain The Coffee Bean & Tea Leaf (CBTL).
In a disclosure to the Philippine Stock Exchange on Thursday, JFC said its wholly owned subsidiary, Jollibee Worldwide Pte. Ltd., had mandated Citigroup Global Markets Singapore Pte. Ltd. and J.P. Morgan (SEA) Ltd. as joint global coordinators, and Citigroup, Credit Suisse, J.P. Morgan and Mizuho Securities as joint lead managers and joint bookrunners to arrange a series of fixed income investor meetings in Hong Kong, Singapore and London.Subject to market conditions after the road shows, which will start on Jan. 13, JFC said a Regulation S US-dollar guaranteed senior perpetual capital securities offering might follow.
Regulation S securities refer to bonds or stocks that may not be offered, sold or delivered within the United States.
Proceeds from the offering are intended primarily to refinance the short-term debt contracted to help finance the acquisition of International Coffee and Tea LLC (CBTL), that was completed on Sept. 24, 2019, alongside other general corporate purposes. This acquisition is JFC’s biggest takeover deal to date.“The securities will be accounted for as equity and will strengthen the balance sheet of the guarantor, in line with its policy of prudent financial management,” the disclosure said.While some stock analysts fear the earnings drag from CBTL at a time when Jollibee is still digesting its acquisition of American hamburger chain Smashburger, JFC is confident of turning around loss-making CBTL in 12 to 18 months.
In 2018, CBTL incurred a net loss of $21 million out of $313 million in total revenue while total cash flow as measured by earnings before interest, taxes, depreciation and amortization amounted to $23.7 million.Founded in 1963, CBTL’s biggest markets are the United States and South Korea, where it has 284 and 292 outlets, respectively. The Philippines is the third biggest market with 139 stores. In the whole of Southeast Asia, CBTL has 447 outlets, including 101 in Indonesia, 99 in Malaysia and 61 in Singapore. It has 36 stores in Kuwait, 28 in Qatar 28 and 27 in India.