Ayala’s offshore perpetual bond offer raises $400M

The country’s oldest business house Ayala Corp. has raised $400 million from a fresh offering of offshore perpetual bonds that fetched the cheapest ever fixed-for-life interest rate out of Southeast Asia to date.

The bonds carried a fixed-for-life coupon rate of 4.85 percent a year, the lowest-yielding fixed-for-life perpetual securities carved out of the region, Ayala disclosed to the Philippine Stock Exchange on Thursday.

The bonds will be issued by Ayala subsidiary AYC Finance Ltd. and will be unconditionally and irrevocably guaranteed by parent conglomerate Ayala Corp.

Net proceeds will be used to refinance maturing US dollar-denominated obligations and fund investments of Ayala or its offshore subsidiaries.

A fixed-for-life perpetual issuance means the rate never changes. There is no resetting or step-up provision that could increase the cost of borrowing after the synthetic maturity period is reached. This is in contrast with other perpetual bonds which have coupons or dividend rates that increase, thus encouraging the issuer to redeem them.

“The successful fixed for life issuance will further support our thrust for sustainable growth and enable Ayala Corp. to diversify our liquidity sources and strengthen our balance sheet. We are very pleased with the strong investor receptivity and continued support,” said Ayala chair and chief executive officer Jaime Augusto Zobel de Ayala.

“We are grateful for the unwavering support from the investors despite volatile market conditions. This issuance will provide us with additional flexibility to lengthen our maturity profile and support our strategic initiatives,” said Ayala chief financial officer Jose Teodoro Limcaoco.

AYC was the second issuer in Asia Pacific able to price a fixed-for life perpetual offering this 2019.

When AYC first raised $400 million from a similar instrument in 2017—which marked the first fixed-for-life corporate debt deal out of Southeast Asia then—the perpetual notes carried an annual coupon of 5.125 percent.

For this new issuance, Ayala said the order book was allocated predominantly to Asia, with the rest to Europe. By investor type, more than half of the offering was allocated to fund managers, insurance companies and pension funds, around one-quarter to banks and financial institutions and the remainder to private banks.

HSBC was the sole global coordinator for the transaction while BPI Capital Corp., Credit Suisse (Hong Kong) Ltd., HSBC (B&D), JP Morgan Securities plc and UBS AG Singapore Branch were the joint lead manager and joint bookrunners for the transaction. China Bank Capital Corp. and BDO Capital & Investment Corp. participated as domestic lead managers.

Ayala has interests in real estate, financial services, telecommunications, water, power generation, infrastructure, health care and education.