Globe hikes bond offer to P5 billion

MANILA, Philippines - Globe Telecom and the underwriters for its P3-billion corporate bond issuance have agreed to double the amount of oversubscription to P2 billion due to increased investor interest.

The proceeds of the bond issue will be used to finance the company’s various capital expenditures.

Assuming that the oversubcription is fully exercised, Globe said it would issue up to P5 billion in aggregate principal amount of retail bonds on Feb. 25 this year.

Earlier, Globe entered into an underwriting agreement with lead underwriters BPI Capital Corp., BDO Capital Corp., and First Metro Investment Corp. Also engaged for the issuance as co-lead underwriter and participating underwriter, respectively, are RCBC Capital Corp. and Vicsal Investment.

The P3-billion corporate bonds will be issued in three-year and five-year bonds, with an over subscription option of up to P1 billion. The three-year bonds, maturing in February 2012, will carry an interest of 7.5 percent while the five-year bonds, maturing in February 2014, will have an eight-percent return, to be paid quarterly.

Optional redemption for the five-year bonds has been scheduled for the 12th interest payment date. Minimum investment is P50,000 and can be increased at increments of P10,000 and will be available for availment between Feb. 12 and 19 this year.

Globe is spending $350 to $400 million this year, of which around $150 million will be spent for consumer broadband including the third generation of mobile communications technology (3G), $130 million for core cellular 2G (second generation mobile technology), $25 million for corporate data, $20 million for support capex, and $25 million as carry-over spend for international cable facilities and other non-recurring capex.

The 2009 capex budget of around P16.5 billion is 23 percent of 2008 revenues. In 2008, capex was at P19.9 billion for a capex to revenue ratio of 30 percent.

Globe chief finance officer Delfin Gonzalez earlier said that this year’s capex is lower because the 2008 numbers included non-recurring capex for Globe’s participation in the international cable project, landing station, and backhaul.

Aside from $66 million in borrowings earlier drawn, Gonzalez said Globe is looking at sourcing another P5 billion in the near term from the proceeds of a company retail bond offer. Globe was recently authorized to offer up to P10 billion in retail bonds to finance both capex and maturing debts this year of around $250 million.

Earlier, Globe president and CEO Gerardo Ablaza said that he expects a better year for the company in 2009, as it is expected to generate modest growths both in terms of revenues and the bottomline.

“We continue to be cautiously optimistic about the prospects for the wireless sector, which will be slower compared to last year. But there will be some resiliency in mobile usage,” he pointed out.

In the case of the broadband sector, Ablaza said they project the growth momentum to continue into this year, offsetting declines in the traditional landline service. For wireline and corporate data, he said there will still be growth opportunities as corporate demand remains resilient, particularly for mission-critical services including those of the business process outsourcing (BPO) sector.

To capitalize on the momentum generated during the fourth quarter of 2008, Globe said it is increasing its share of telco spend and sustaining its second half 2008 growth momentum.

For broadband, Ablaza said the company will deploy leapfrog technologies such as Wi-Max and 3G, improve network quality and coverage, and introduce affordable products and bundles that will drive adoption in broader markets.