Aboitiz fears funding challenges as rates soar
The Aboitiz Group is scouting for new investments with higher returns amid concerns the rising interest rate environment would make future project financing more costly.
The Aboitiz clan’s flagship power, food, banking and property conglomerate, Aboitiz Equity Ventures Inc. (AEV), is aggressively expanding its core businesses and recently diversified into new segments, including infrastructure such as airports, which require heavy capital spending.
Higher borrowing costs would shift their priority to more profitable investments or explore alternative financing sources, company AEV financial officer Manuel Lozano said on Friday.
“Our existing portfolio of loans and bonds do not have a floating component that puts us at risk of higher interest rates. However, this does pose a challenge for new projects,” Lozano said.
“The rates of return that we look for in these projects will have to be better so we can make up for the higher interest rates and it looks like these interest rates are going to stay high for a longer period of time. It’s not a short-term issue,” he said.
“I think everyone will have to adjust how they look at projects, how they finance them, and they will have to account for higher interest rates,” Lozano added.
The Bangko Sentral ng Pilpinas (BSP) had raised rates by 225 basis points so far this year, joining global central banks in combating soaring inflation.
Last week, BSP Governor Felipe Medalla said they would hike the benchmark rate by another 75 basis points on Nov. 17 to match the latest monetary policy moves in the United States.
Lozano’s comments come as the Aboitiz conglomerate approved the sale of up to P20 billion in fixed-rate bonds to partially fund the acquisition of the private operator of the Mactan Cebu International Airport, the country’s second-busiest gateway.
Last September, the Aboitiz Group sealed a P25 billion deal to fully acquire the Cebu Airport project from tycoon Edgar Saavedra’s Megawide Construction Corp. and India’s GMR Infrastructure by 2024.
More airport projects were in the cards as the group wanted to build a regional network of gateways with the Cebu project serving as the main hub, Aboitiz InfraCapital president and CEO Cosette Canilao said on Friday.
She said they would pursue airport proposals in Bohol, Laguindingan and Bicol, which remain valid since Aboitiz was previously granted an exclusive original proponent status (OPS) for the said projects.
“We are submitting additional requirements to the government to move forward our OPS,” Canilao said, adding that they were open to other air gateways that would be bid out under a Public Private Partnership format.
“We want to build an airport platform and having Mactan as the anchor asset would make sense for the regional airpots,” she explained.
Meanwhile, other Aboitiz subsidiaries have signalled a preference for equity financing for new investments.
On Nov. 2, UnionBank told the stock exchange its board approved a maximum P20 billion fundraising plan though another rights offer, a private placement or a combination of both.
Last May, it raised P40 billion from a stock rights offer to partly finance the takeover of Citi Philippines’ consumer business and sold P11 billion in bonds last June.
