San Miguel Brewery gets triple-A rating for P20-B retail bond offering

MANILA, Philippines—Leading beer-maker San Miguel Brewery has obtained a triple-A credit rating from credit watcher from Philippine Rating Services Corp. on its upcoming P20-billion retail bond offering.

In a press statement on Tuesday, Philratings said it had assigned a PRS Aaa issue rating – the highest rating in its scale – for SMB’s bonds, which would have a minimum tenor of five years up to a maximum of 10 years. This rating means that the bonds were deemed “of the highest quality with minimal credit risk” and that the borrower’s capacity to meet its financial commitment on the obligation was “extremely strong.”

This is rating in line with SMB’s planned return to the retail bond market for the first time since 2009 when it made history with its bond debut worth of P38.8 billion, the single largest retail bond issue in the local bond  market.

Proceeds from the proposed bonds are intended to be used to refinance the company’s current and upcoming maturities. These include a portion of its outstanding P38.8 billion bond issue worth P13.59 billion, which will mature on April 3, 2012 and a $300-million term facility.

The P38.8-billion outstanding bond issue likewise has an outstanding PRS Aaa issue rating with PhilRatings.

Philratings said the rating assigned to the proposed bond issuance reflected following key considerations:

• SMB’s dominant market position domestically;

• Experienced management and production team, with technical support from shareholder Kirin Holdings;

• High cash from operations and profitability;

• Sustained financial flexibility and adequate capitalization; and

• Enhanced financial position of the company in the medium term given that its refinancing plan will allow it to take advantage of current favorable market rates and extend maturities.

SMB, a major cash cow of San Miguel Corp., has been a long-time leader in the Philippine beer industry, with a market share estimated at more than 90 percent in 2010, Philratings said. This company has six main production facilities in the Philippines, which produce its line-up of well known brands including, San Miguel Pale Pilsen, Red Horse Beer and San Mig Light which Philratings said have been sold through an “extensive and efficient” distribution system.

PhilRatings believes that the company’s market dominance in the Philippines would continue to be supported by the factors mentioned above and the high barriers to entry that exist for prospective players.

“Historically, SMB has generated more than sufficient earnings to service its debt and to provide more than adequate protection against unexpected external shocks. PhilRatings believes that SMB’s historical profit performance will continue, supported by its strong market position,” the statement said.