Lopez power unit issues P10B preferred shares

The Lopez-led First Gen Corp. said Tuesday it has successfully issued P10 billion worth of perpetual preferred shares at a dividend rate of 8 percent.

In a disclosure to the Philippine Stock Exchange, First Gen said the issuance was twice oversubscribed due to the “overwhelming response from the institutional investor community.” First Gen’s originally contemplated issue size was only P5 billion.

According to First Gen, proceeds from the preferred shares offer would be used to refinance debt obligation and buy back the company’s 2.5-percent convertible bonds due 2013. A portion may also be used to partially fund various acquisitions, investments and development projects.

BDO Capital and Investment Corp. was the issue manager, sole bookrunner and lead arranger mandated by First Gen. RCBC Capital Corp. and Standard Chartered Bank were the co-arrangers for the preferred shares offer.

The preferred shares are cumulative, non-voting, non-participating, non-convertible and peso-denominated. On the seventh anniversary of the issue date or on any dividend payment date thereafter, the company will have the option, but not the obligation, to redeem all of the preferred shares outstanding.

Federico Lopez, chairman and CEO of First Gen, earlier noted that the issuance of perpetual preferred shares would be “an equity fund-raising essentially.”

“So, in our minds, it would be good to reduce debt in favor of a bit more equity,” Lopez said.

Since last year, First Gen and its subsidiaries have been taking advantage of a highly liquid market by raising fresh funds through rights offering, syndicated term loan and notes facility. These transactions generated savings on interest costs by prepaying costlier debt.

First Gen’s consolidated interest-bearing debt level dropped 11 percent or $130 million to $1 billion as of end-2010. Funds from the P15-billion rights offering in January last year were used to fully pay the P5-billion, five-year bonds that matured in July 2010 and buy back $74 million of First Gen convertible bonds.