BIZ BUZZ: Phoenix’s maturing debt maneuver

A number of bankers were surprised at the latest move of Phoenix Petroleum, the flagship company of billionaire businessman Dennis A. Uy, vis-a-vis its creditors.

That’s because Phoenix has some P3 billion worth of bonds maturing in a few days, with many retail lenders counting themselves as holders of these debt securities.

Bankers told Biz Buzz a number of these retail lenders have received love letters from Phoenix about the company’s maturing obligation.

No, it’s not quite bad news, but it raised some eyebrows, nonetheless. That’s because, in its love letter, Phoenix had offered to pay these lenders handsome returns if, instead of demanding their money back when the bonds mature later this month, they agree to roll over the obligation for a few more months.

Superficially, any love letter recipient who agrees to keep his money with Phoenix for six more months will receive an interest rate of 7 percent (computed annually) while those who agree to roll over the debt for a full year will receive an even better rate of 7.5 percent.

That’s a tempting offer, given that interest rates in the Philippines are now at historic lows, thanks to the central bank’s attempt to revive the economy with ultra loose monetary policy. When juxtaposed with this, a 7-percent yield is extremely tempting and almost impossible to find nowadays.

There’s a catch, however. And this is what is raising the hackles of bankers.

The love letter asks creditors interested in rolling over their debt to contact Phoenix directly and inform them of such intention. This is slightly different from the usual practice of corporate borrowers going through financial intermediaries like banks and investment houses when trying to raise money from external founders, whether on the wholesale or retail level.

What Phoenix is basically doing is cutting out the middlemen and going straight to the source of the funds.

Some banks are now worried that their wealthy clients who end up agreeing to the tempting offer may be doing so without the benefit of expert advice from their investment advisors.

More importantly, a number of banks are also worried these clients who agree to roll over Phoenix’s debt (made through promissory notes) will be doing so without the protection (from potential default, among others) enjoyed by regular bondholders.

And most importantly, these bankers are wondering how Phoenix will be able to issue these promissory notes—essentially debt securities—to potentially hundreds of retail creditors without seeking the approval of the Securities and Exchange Commission. Based on the “19 lender rule,” any debt paper that has at least 20 funders must be registered with the corporate regulator.

Questions, questions. Will they ever be answered? Abangan!

—Daxim L. Lucas

Best bank

Giving its larger peers a run for their money, Security Bank has bagged the “Philippines’ Best Bank” award from London-based financial magazine Euromoney during the 2021 Euromoney Awards for Excellence. “In the competitive field of Philippine banking, the best response to COVID-19 came not from the biggest banks but a rising star, Security Bank. From the outset, Security Bank took a stance of protection: of itself, its people, its customers and its community. It is testament to the bank’s policies that it not only stayed strong but grew,” Euromoney said.

The publication cited the bank’s all-time high revenues of P50.4 billion ($1.05 billion) in 2020, up 48 percent year on year, translating into preprovision operating profits of P30.7 billion, up 85 percent.

“Security Bank took advantage of its ties with MUFG to build a strategic partnership with bank of Ayudhya in Thailand, another member of the MUFG extended family. The two will work together on the consumer finance division, with digital a priority. A cash management agreement was also struck with MUFG. Elsewhere in the bank, the wealth management business grew impressively,” added Euromoney.

MUFG, the largest bank in Japan, infused P36.9 billion in fresh capital to Security Bank in exchange for a 20-percent stake in 2016.

Sanjiv Vohra, president and CEO of Security Bank, the eighth largest private local universal bank, said 2020 was one of the toughest years for many sectors, including the banking industry.

“We thank our clients, partners and employees for their continued trust in Security Bank, which has made this recognition possible. Being named the Philippines’ Best Bank energizes us towards our goal of being the most customer-centric bank in the Philippines,” he said.

“This recognition affirms our ‘better banking’ commitment to our customers. We’re heavily investing in what matters to them so they can adapt quickly and find paths to growth,” added Vohra.

Launched in 1992 and now on its 29th year, the Euromoney Awards for Excellence seeks the “best of the best” in all countries offering banking services.

The latest award makes even more meaningful Security Bank’s 70th anniversary celebration this year. Its other citations are: “Best for HNWs (High Net Worth Clients)” in the Philippines 2021 from Asiamoney and “Best Retail Bank in the Philippines” in 2021 from Alpha Southeast Asia.

—Doris Dumlao-Abadilla

Milk tea boom

Apart from the recent rise in meat alternative food offerings, the prolonged COVID-19 pandemic has likewise boosted demand for milk tea, as consumers go for healthier beverage options.

Even at the height of the lockdowns last year, we heard that some retailers like Macao Imperial Tea have done well, especially on the delivery side.

Fruitas Holdings also sees a big opportunity to grow its Tea-Rex brand.

Fast-food giant Jollibee Foods Corp. recently bagged the right to exclusively sell and market popular Taiwanese bubble tea brand Milksha in its restaurants. The plan is for Milksha products to be initially sold in Chowking stores, but Jollibee may roll out to other local restaurant brands in the future.

Shakey’s Asia Pizza Ventures recently added R&B Milk Tea, one of Singapore’s leading brands in the category, to its portfolio. It has so far rolled out the brand to 133 Shakey’s and Peri-Peri Chicken outlets.

Beyond the usual soft drinks, iced tea and fruit juice options in local restaurants, consumers are increasingly given more options, whether for dine-in, takeout or delivery to their homes.

—Doris Dumlao-Abadilla INQ