SMB raises P20B through sale of long-term bonds

Local beer giant San Miguel Brewery Inc. has returned to the local retail bond market for the first time in three years, raising P20 billion from the sale of long-term fixed-rate bonds.

In a disclosure to the Philippine Stock Exchange Wednesday, SMB said the bonds with tenors of five years (plus one day), seven years and 10 years were priced at a coupon rate of between 5.93 percent and 6.6 percent.

SMB will issue five-year (series D) bonds at 6.05 per year, seven-year bonds at 5.93 percent (series E) and 10-year bonds (series F), 6.6 percent.

The pricing suggests that the seven-year tenor was the sweet spot among investors. A spokesperson from parent conglomerate San Miguel Corp. said the lower rate for this tenor compared to the five-year bond was “demand-driven.” This means investors are flocking to the seven-year tenor, thus driving down the yield.

A senior banker said there was a strong demand for seven-year debt paper because this was the tenor lacking in many institutional investors’ portfolio relative to the five- and 10-year securities.

With many investors spreading their portfolio mix, the banker said this was what must have triggered the influx of tenders for SMB’s seven-year bonds.

Another banker involved in the deal said the bookbuilding for the bonds was completed alongside the pricing. “Allocations are being given out,” the banker said.

The pricing had been approved by the SMB board but the beer-maker is still awaiting approval from the Securities and Exchange Commission for the registration of the bonds.

Based on an earlier registration statement, the arrangers are ING Bank N.V., BDO Capital and Investment Corp., HSBC, SB Capital Investment Corp. and Standard Chartered Bank. The bonds will be listed on the Philippine Dealing and Exchange Corp.

SMB debuted on the local bond market in 2009 with the issuance of P38.8 billion worth of retail bonds, the single largest bond deal in the local market.

A P13.6-billion tranche of the bond issue, however, is maturing in April this year. SMB seeks to refinance this tranche using part of the proceeds from the new bond float. The remainder will be used to help pay ahead of maturity a $300-million creditor term facility.

SMB grew its net profit last year by 17.4 percent to P12.2 billion on the back of higher volume and selling prices. Its consolidated net sales revenue grew by 6.3 percent to reach P71.9 billion last year, driven by higher-selling prices and sales volume, for both domestic and international operations.

In the meantime, parent SMC and the Citra group of Indonesia are in talks with banks to arrange the financing for their tollway projects. SMC disclosed the talks with a consortium of banks in reaction to a wire report that it had raised $500 million to help finance the acquisition of a controlling stake in the 36-kilometer South Luzon Expressway.