Phoenix board OK’s P500M convertible notes issuance

Publicly listed Phoenix Petroleum Philippines has gotten last week the approval of its board for the issuance of P500 million in convertible notes, with warrants worth P180 million.

The notes with warrants will be issued to BDO Universal Bank. The P180-million warrant gives BDO the option to buy P180 million worth of stocks after three years at a price to be agreed upon by both parties.

In a disclosure to the Philippine Stock Exchange on Monday, Phoenix Petroleum said the issuance would be presented for approval to its stockholders in a special meeting in September.

In a separate text message, Phoenix AVP for external affairs Raymond T. Zorrilla noted that the notes issuance would be undertaken following the signing of the agreement with BDO for the warrant issuance.

Zorilla said proceeds of the issue “will be used to finance the expansion of our retail network and the storage capacities of our various terminals.”

Phoenix Petroleum has been embarking on its most aggressive retail network expansion program to date, which involves the setting up of about 100 gas stations this year. Under this program, the company allocated P500 million to put up 40 gas stations in Luzon next year; 20 in the Visayas; and 40 more in Mindanao, in a bid “to formalize our claim to be the leading independent player in the oil industry.”

With these 100 stations, Phoenix Petroleum will have a total of 320 outlets by the end of next year, from 220 stations as of the end of 2011.

Phoenix is also planning to put up three more depot terminals in Iloilo, Bacolod and Cebu to support its growing retail network.

Phoenix Petroleum said in the same disclosure that its board had also approved the acquisition of the entire shares of stock of Chelsea Shipping Corp. through a “share-for-share swap” arrangement. Chelsea is currently owned by Udenna Management and Resources Corp. (UMRC), which is an existing stockholder of the Phoenix Petroleum.

Phoenix Petroleum will issue 171 million common shares of the company’s authorized but unissued capital stock for an implied value of about P1.4 billion.

According to the oil firm, this move will allow it to ensure control of product supply and minimize the potential risk of supply disruptions due to scarcity of tanker vessels.

Chelsea Shipping was incorporated on July 17, 2006, and has 10 vessels in its fleet, two of which serve the regional trade route (Taiwan to Philippines).

Chelsea Shipping owns the largest Philippine-registered oil tanker M/T Chelsea Thelma, which is among the top five major tanker owners in the country.

Apart from Phoenix Petroleum, Chelsea Shipping also provides services to Cebu Pacific Air Inc., PTT Philippines Inc., Total Bulk Corp. (which services Philippine Airlines and Air Philippines), Batangas Bay Carriers Inc. and Marine Fuels Philippines Inc. of the Magsaysay Group of Companies.