We all have those moments where we think borrowing money is the solution to our business or investment problems. It happened to Mr. Manuel V. Pangilinan, who was caught up in trouble with borrowing binge decades back. Now, he is going after the biggest initial public offering (IPO) here in the Philippines so he can avoid the risk of repeating the same trouble. In fact, he is also trying to make a giant share sale for the hospital unit of Metro Pacific Investments Corporation in order to raise up to $1.6 billion. The IPO is still awaiting the approval of regulators.
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The proceeds from the IPO will just go out as fast as it comes in since Metro Pacific has billions of dollars currently in borrowings and large outlays are needed for its projects for the next years including toll-road, light-rail projects, and power generation. The firm is confident that it has built a real tangible gain from investing in a hospital unit. This business unit was started in 2007 and Metro Pacific invested about $100 million in it. So, the proceeds from its IPO will mostly go to the reduction of the debt of the firm.
Now that Metro Pacific has found a way to pay its loans, this time, it is addressing its debt to prevent it from becoming an issue. The firm, together with its subsidiaries, has debts amounting to $4.73 billion for amassing power, toll road, water, and hospital assets. $1.3 billion of it will become due from this year through 2023. From the expected sale of $1.6 billion, Metro Pacific would be getting $970 million as it will sell down its 60% stake in Metro Pacific Hospital Holdings Inc. to 20%. $125 million will go to its expansion and the remaining from the sale of half of 40% stake will go to Singapore sovereign wealth fund GIC Pte.
The firm will save P2 billion in annual interest costs from the payment of the debt so to provide a better foundation to finance its plan for a 3-year expansion that will include light railway, toll roads, and four waste-to-power projects. Although there is a big amount coming in, the money will go back quickly to the project of Metro Pacific. It expects that in the next few years, there will be a lot of capital to spend but it would take time for payback.