SM raises $500M from offshore bond foray

MANILA, Philippines—Tycoon Henry Sy-led SM Investments Corp. has raised $500 million from the sale of overseas bonds at one of the lowest rates snagged by a Philippine corporate issuer for a seven-year tenor.

SMIC on Thursday said it had priced the seven-year offshore bond issue to yield a fixed rate of 4.25 percent a year.

The issue was “substantially oversubscribed,” attracting subscriptions worth $3.1 billion from institutional and private banking investors in the Philippines and across Asia and Europe, allowing SMIC to upsize the issue from the initial indicative size of $200 million.

The bond issue is a debt management exercise that will further lengthen SMIC’s debt profile and take advantage of the much-improved interest rate environment.

“This exercise is also our way of maintaining our presence in the bond market and fostering a sustainable relationship with the international investment community,” SMIC executive vice president and chief finance officer Jose Sio said in a statement.

Citi, Deutsche Bank and J.P. Morgan acted as joint lead managers and joint bookrunners for the transaction.

SMIC was originally planning to issue seven- and 10-year bonds but decided to issue only seven-year bonds to take advantage of the low interest rates, said company investor relations chief Cora Guidote.

Guidote said a 10-year tenor would have been expensive to issue offshore at this time.

The conglomerate, through various subsidiaries, is the dominant player in Philippine banking, shopping mall and retailing businesses. It is also a fast-growing player in residential condominium and hotel/convention center development.

The last time SMIC ventured into the overseas bond market was in February this year, although that involved a convertible bond issue rather than a straight bond offer. In February, SMIC raised $250 million from the sale of offshore five-year bonds, which investors can convert into equity. This was the first convertible bond offered out of the Philippines this year.

Also, SMIC had a $400-million issue and bond exchange in 2010. This was the first ever liability management transaction by a Philippine corporate issuer.

Originally posted at 09:39 am | Thursday, October 11, 2012