AC issues $400-M perpetual notes

The country’s oldest business house, Ayala Corp., debuted on the overseas perpetual bond market with the issuance of $400 million in landmark senior notes, the first fixed-for-life corporate debt deal out of Southeast Asia.

The perpetual notes, issued by unit AYC Finance Ltd. and guaranteed by the 183-year-old conglomerate, carried an annual coupon of 5.125 percent for life with no step-up or resetting deal.

“The successful launch of fixed-for-life notes provides us with the financial flexibility to manage our balance sheet and diversify our sources of capital,” Ayala Corp. chair and CEO Jaime Augusto Zobel de Ayala II said.

“Finding favorable conditions in a volatile credit market allows Ayala to optimize its average cost of funding while extending its debt maturity profile,” said Ayala Corp. chief finance officer Jose Teodoro Limcaoco.

Fixed-for-life perpetual issuance means the rate never changes: there is no resetting or step-up provision that could increase the borrowing cost.

“This issue shows how strongly the investor community supports Ayala and our commitment to sustainable businesses and good governance,” he added.

The landmark notes were priced 50 basis points lower than the original guidance amid strong demand for the offering, which was more than five times oversubscribed.

Some 19 percent of the order book was allocated to investors from the Philippines, 10 percent from Europe and the remaining 71 percent to investors from the rest of Asia.

By investor type, fund and asset managers gobbled up 67 percent of the issuance while banks took up 12 percent. Insurance and pension funds accounted for 7 percent while private banks and other investors took up the remaining 14 percent.

The transaction is expected to be settled on Sept. 13, 2017.

Hongkong and Shanghai Banking Corp. Ltd. (HSBC) acted as global coordinator for this issuance while Deutsche Bank A.G. (Singapore Branch), HSBC and J.P. Morgan Securities plc were the joint lead managers. BPI Capital Corp. and Chinabank Capital Corp. acted as the domestic lead managers.