Firms defer debt issues due to COVID-19

The financial market bloodbath arising from the COVID-19 pandemic has prompted some of the country’s top corporations to defer big-ticket fund-raising plans.

Conglomerate San Miguel Corp. announced on Friday the deferment of its application with the Securities and Exchange Commission (SEC) to raise P60 billion from an offering of commercial paper, or debt securities with maturity of up to a year.

The country’s leading lender, BDO Unibank, also deferred a P5-billion bond offering.

For SMC, the deferment will be “until such time that conditions stabilize, taking into consideration the COVID-19 outbreak and following the adoption by the Philippine government of enhanced community quarantine and stringent distancing measures over the entire island of Luzon,” SMC said.

The monthlong lockdown of Luzon, which accounts for 73 percent of the Philippine economy, will take effect until April 12.

No application forms

Asked whether more corporate fund-raising plans will likely be deferred, BDO Capital president Eduardo Francisco said in a text message on Friday: “They will try not to but some may inadvertently [do] so because investors can not get the application forms and issue checks if they are at home.”

“It’s harder for us to conduct investor briefing for a new deal also if people are not working in their offices and we can’t convene large meetings,” Francisco said.

During the Luzon-wide lockdown, the government prohibits mass gatherings and limits the movement of people. Only private establishments offering basic goods are allowed to operate.

SMC, which was planning to use the proceeds to redeem outstanding preferred shares, submitted its application for the commercial paper offering on Feb. 6, 2020.

“Accordingly, we respectfully request the SEC to hold off on further action in connection with the registration statement of the company,” SMC said, adding that it would waive the 45-day review period for the issuance.

First tranche

SMC intended to register the P60 billion worth of commercial paper under a three-year shelf registration window of the SEC. The first tranche will have a size of P15 billion, with an option to upsize by another P5 billion.

The arrangers and joint lead underwriters for SMC’s offering are: BDO Capital, BPI Capital, China Bank Capital and SB Capital Investment Corp. The sole issue manager is Philippine Commercial Capital Inc.

Reassessment

In announcing the deferment of its P5-billion bond offering, BDO likewise cited the quarantine imposed in Metro Manila and the rest of Luzon amid the COVID-19 outbreak.

“The deferral will allow potential investors to reassess their investment and liquidity needs considering the expected short-term disruption in certain business activities arising from the enhanced community quarantine,” BDO said.

BDO assured its clients that its branches and offices remained open to serve their requirements. The bank’s business continuity plan has been activated to sustain banking operations even with the Luzon-wide quarantine.