To refinance costlier debt, Ayala to reenter offshore bond market

Conglomerate Ayala Corp. is returning to the offshore bond market for the first time since the start of the COVID-19 pandemic, while also offering to redeem as much as $800 million worth of older and costlier perpetual bonds to take advantage of the slowdown in interest rates since last year.

The country’s oldest business house disclosed to the Philippine Stock Exchange on Wednesday that it had mandated BPI Capital Corp., Citigroup Global Markets Singapore Pte. Ltd., Credit Suisse (Singapore) Limited, J.P. Morgan (S.E.A.) Limited, Mizuho Securities (Singapore) Pte. Ltd. and UBS AG Singapore branch as joint lead managers and joint bookrunners to arrange a series of fixed income investor calls.

This is in line with a planned offering, albeit subject to market conditions, of a “Regulation S” US-denominated senior fixed-for-life (non-deferrable) perpetual notes by wholly owned subsidiary AYC Finance Ltd.

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

The last time that AYC Finance tapped the offshore bond market was in October 2019, when it raised $400 million from an issuance of perpetual bonds that carried a fixed-for-life coupon rate of 4.85 percent a year, the lowest-yielding fixed-for-life perpetual securities carved out of Southeast Asia at that time.

Since the COVID-19 turned into a global crisis in 2020, however, global interest rates have further declined to record lows as major central banks eased monetary settings to curb economic fallout from the pandemic.

AYC Finance’s borrowings are unconditionally and irrevocably guaranteed by the parent firm, Ayala.

Meanwhile, Ayala also announced a tender offer for those $400 million perpetual bonds issued in 2019 as well as the $400-million 5.125-percent senior fixed-for-life perpetual notes issued in 2017. These bonds carried no step-up or resetting deal.

The offer will expire on September 24 at 4:00 p.m., London time.

Ayala disclosed that proceeds from the new notes issuance would refinance outstanding offshore debt, including those that will be bought back as part of the tender offer.

“The notes issuance and the tender offer are part of AC’s active liability management exercise that aims to take advantage of capital markets opportunities if and when they arise,” it said.

As companies conserve liquidity during the prolonged pandemic, many are refinancing costlier debt while interest rates are at record lows.