SM Investments to launch P15-B bond offer this month

Tycoon Henry Sy’s SM Investments Corp. is set to offer of as much as P15 billion in long-term bonds before the end of June after obtaining approval from the Securities and Exchange Commission.

It will be SMIC’s first time to offer retail bonds since 2009 when it issued P10 billion worth of bonds. Proceeds from the issue will be used to expand SMIC’s hotel and office property businesses as well as for landbanking in the next five years.

Based on documents from the SEC, SMIC’s bonds will have a term of seven and 10 years with a base offering size of P10 billion and an option to increase by P5 billion in case of oversubscription. The offering was approved by the SEC en banc in its recent meeting.

SMIC head of investor relations Cora Guidote said yesterday that following the approval, the issue would be tentatively priced on June 20 while the offering would start June 27.

The conglomerate has mandated BDO Capital, First Metro Investment Corp., China Bank and BPI Capital Corp. to arrange the offering, each having committed to take up at least P2.5 billion.

The proposed bonds due 2019 and 2022 will be issued in scripless form at 100 percent of face value. Prior to final redemption, SMIC will have a one-time option but will not be obligated to redeem the bonds in whole. The redemption option is open on the 10th interest payment of the seven-year bonds and on the 14th interest payment for the 10-year bonds.

Indicative interest rate will be a maximum of 6.2115 percent a year for the seven-year bonds based on PDST-F benchmark as of May 21 and 6.975 percent a year for the 10-year bonds. The bonds will be listed on the local fixed income exchange Philippine Dealing and Exchange Corp.

The proposed bonds have obtained the highest rating of PRS Aaa from Philippine Rating Services Corp., which considered SMIC’s diversified business portfolio (with core companies with strong market positions), sustained earnings and recurring cash flows, solid brand equity and experienced management team as well as strong liquidity and sound capitalization.

Based on the documents, net proceeds from the offer will finance the group’s capital expenditures for the next five years as well as for general corporate purposes. Specifically, the following amounts are earmarked for these projects in the next five years: SM Arena (P500 million), Park Inn Davao (P714 million), Luxury City Hotel (P3.4 billion), Luxury Hotel-Santelmo in Batangas (P1.53 billion), Park Inn Clark (P321 million) and land acquisition (P5.48 billion).