Jollibee turns to offshore capital market for funds, raises $600M

Fast-food giant Jollibee Foods Corp. (JFC) has debuted in the offshore capital market by raising $600 million from a landmark issuance of perpetual securities, replenishing its war chest after buying American specialty chain Coffee Bean & Tea Leaf (CBTL).

This transaction represents the first ever bond or perpetual securities issuance of JFC and the first time that this globalizing restaurant chain has tapped the capital market since its initial public offering in 1993. The issuance is also one of the first by an Asian restaurant company.

Through its wholly-owned subsidiary, Jollibee Worldwide Pte. Ltd. (JWPL), the group is issuing US dollar-denominated Regulation S senior perpetual capital securities at a rate of 3.9 percent a year for the first five years.

Regulation S securities refer to bonds or stocks that may not be offered, sold or delivered within the United States.

In a disclosure to the Philippine Stock Exchange on Friday, JFC said the transaction was oversubscribed by almost 10 times the original intended issue amount of $400 million. This brisk demand allowed the company to upsize the transaction and tighten final pricing by 35 basis points from the initial price guidance of 4.25 percent. This is so far the lowest pricing for a five-year perpetual securities issued by a Philippine company.

The securities are unrated and will be listed on the Singapore Exchange Securities Trading Ltd.

“The objective of management for this issuance is to further strengthen the balance sheet of JFC and build a stronger foundation for accelerating its growth in order to achieve its vision to become one of the top five restaurant companies in the world,” JFC said.

The securities qualify to form part of JFC’s equity base.

Proceeds from the offering are intended primarily to refinance the short-term debt incurred for the acquisition of International Coffee and Tea LLC (The Coffee Bean & Tea Leaf), completed on Sept. 24, 2019, as well as to fund general corporate purposes.

Citigroup and J.P. Morgan acted as the joint global coordinators. Citigroup, Credit Suisse, J.P. Morgan, and Mizuho Securities were the joint lead managers and joint bookrunners for the transaction while BPI Capital Corp., Chinabank Capital Corp. and PNB Capital and Investment Corp. were the joint domestic managers.

While some stock analysts fear the drag on earnings from CBTL at a time when Jollibee was still digesting its acquisition of American hamburger chain Smashburger, JFC was 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 (Ebitda) 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.