SMC eyes $350-M bond issue

San Miguel Corp. is considering tapping the debt market by issuing between $150 million to $350 million in dollar-denominated bonds to help cover a $1.15 billion bridge loan, according to debt market news service Basis Points.

Basis Points said the bond size will be determined based on the outcome of San Miguel’s planned syndicated loans.

According to Basis Points, San Miguel is also planning to secure a $300 million to $500 million offshore loan and another A$500 million loan in the Australian domestic market.

San Miguel earlier secured a $1.85 billion loan from a syndicate of financial institutions, of which $1.4 billion would go towards the purchase of Australian dairy giant National Foods Ltd. while the remaining $450 million will be used to offset and refinance existing debt.

San Miguel has a debt capacity of $2 billion. It also raised P18 billion from a recent stock rights offering.

Standard & Poor’s (S&P) earlier cautioned that San Miguel’s credit measures may likely weaken in the short term, due to the incremental debt and associated interest expense after the acquisition of National Foods. But S&P said the expected weakening would still be within the tolerance of San Miguel’s foreign currency rating.

Before the largely debt-financed acquisition of National Foods, San Miguel’s credit profile was stronger than that indicated by its ‘BB-’ foreign currency rating, but remains constrained by the sovereign rating on the Philippines.

According to S&P, San Miguel’s post-acquisition ratio of funds from operations to total debt is likely to fall to 15 percent on a pro-forma basis, compared with the actual result of 32.5 percent last year.

Post-acquisition, San Miguel’s pro-forma EBIT and EBITDA (earnings before interest, taxes, depreciation and amortization) interest covers are likely to worsen to 2.1 times and 3.4 times, respectively, compared with 5.9 times and and 9.6 times, respectively, in 2004 on an actual basis.

National Foods is the maker of top-selling Australian consumer brands Pura fresh milk, King Island cheeses, Yoplait yoghurts and Fruchee dairy desserts.