Globe to redeem $300-M notes earlier

Globe Telecom will redeem $300 million in senior unsecured notes on April 15, five years ahead of original due date, a top company official said.

The prepayment is in line with Globe’s overall efforts to lower costs in all aspects of its operations and to reduce volatility in its profit and loss statement, Globe’s chief financial officer Delfin Gonzalez Jr. said.

By prepaying the notes and refinancing it at current interest rates, the company expects to realize cumulative after-tax interest expense savings of P2.3 billion over the remaining life of the notes, he pointed out.

While this will translate into cumulative after-tax savings in interest expense of about P2.32 billion this year, there will be a one-time impact to net income of about P1.17 billion, largely non-cash in nature, coming from the decline in mark-to-market values of the related derivatives.

"But this will not undermine our core operating performance and will even improve out longer-term financing cost profile as after-tax savings of P444 million a year in interest expense is generated over the remaining life of the notes," Gonzalez emphasized.

To provide funding for the prepayment of the notes, Globe has raised P5 billion via a notes facility agreement arranged by Standard Chartered Bank and $50 million via a term loan with Norddeutsche Landesbank Girozentrale, Singapore branch. The company intends to source the balance of the amount to be prepaid from internal funds.

The company said it is redeeming the notes to take advantage of the low interest rate environment.