Last Friday, September 20, the Securities and Exchange Commission provided the approval to San Miguel Corporation (SMC) for its P10-billion fixed-rate bond issue, which is a tranche of its P60-billion shelf registration. This current news is in response to SMC’s registration of a planned issue of bonds. Initially, the proceeds will be used to redeem preferred shares. This is just one of what SMC has written on its preliminary offer supplement. The other options are to use the proceeds for refinancing or re-denomination of its current loan obligation. Here is other information about approval.
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In the disclosure made by SMC, the permit to sell is dated September 19, 2019. This includes the five-year Series H which will be issued on October 4, 2019. The bonds will due in 2024 with a fixed rate of 5.55%. For investors who are interested, the offer period will commence at 9:00 AM on September 23, 2019, and will finish at 5:00 PM on September 27, 2019. The dates can change depending on what is mutually agreed between SMC and its joint lead underwriters and book-runners. On October 4, 2019, the bonds will be listed on the Philippine Dealing and Exchange Corporation.
I was able to disclose that the initial plan of SMC was to use the net proceeds to redeem its outstanding preferred shares or refinance or redenominate its existing loan obligation. A portion of the proceeds will be utilized to refinance the P6,782,115,000 bridge loan that SMC may get from BDO Unibank, Inc. so that the firm will have the fund to redeem its Series 2-B preferred shares. Also, a part of the funds will be used to repay the short-term loan obligations of SMC worth P3,092,035,000 with Rizal Commercial Banking Corporation.
The company also expects that there will be investment losses and should there be any shortfalls, the Company is ready to finance it from its internally generated funds. This new bond offering is already the 4th offer and the last portion of the P60-billion fixed-rate bonds shelf registration of SMC to be issued. Per the rating of Philratings, the bonds are at PRS Aaa rating. It can be noted that during the second quarter of this year, SMC’s net income fell by 5% but this doesn’t mean that the firm is not performing well. With the progressing economy and easing inflation rate, SMC will eventually bounce back.