First Gen to sell P10B in perpetual bonds

Lopez-led First Gen Corp. has obtained the approval of the Securities and Exchange Commission to sell up to P10 billion worth of perpetual bonds.

Based on SEC documents, First Gen was planning to offer the perpetual bonds from May 7 to 11 through lead underwriters BDO Capital and Investment Corp., BPI Capital, RCBC Capital and Standard Chartered Bank.

Perpetual bonds are hybrid instruments because they are preferred shares that pay coupon but are treated like equity because they do not have maturity date.

SEC has given First Gen authority to issue up to 100 million cumulative, non-voting and non-convertible preferred shares. The base offer involves 70 million shares worth P7 billion and an oversubscription option of 30 million shares.

The First Gen perpetual bonds will be issued at P100 per share. They will have a par value of P10 per share.

The SEC documents indicated that proceeds of the sale would be used to fund the company’s acquisition of BG Group’s shares in two power plants or pay the convertible bond to make a partial repayment of the debt of its affiliate Red Vulcan.

Red Vulcan is the corporate vehicle that owns a 40-percent economic stake and 60-percent voting stake in geothermal power crown jewel Energy Development Corp. Red Vulcan has an outstanding debt of P7.6 billion incurring interest of about 3.7 percent a year.

First Gen’s priority, however, is to buy out BG’s stakes in Sta. Rita and San Lorenzo power plants.

The British company, as part of a global restructuring, is selling its interest in the 1,000-megawatt Sta. Rita and 500-MW San Lorenzo natural gas power facilities in Batangas, which are both majority owned and operated by First Gas Power Corp. The two plants use natural gas from the Malampaya gas field off northwest Palawan.