SMIC completes $500-million bond issue

MANILA, Philippines - SM Investments Corp. (SMIC), the flagship investment holding firm of the Sy family, has successfully completed a $500-million five-year bond issue – the largest dollar bond issue since 1997 – to bolster its status as one of a select handful of Philippine private corporations with access to the international bond market.

The issue marks the first successful bond offering for the country since the reopening of the region’s debt capital markets, with the lowest coupon rate to be issued by a Philippine corporate.

Barclays Capital and Citigroup were the joint lead managers and bookrunners for the deal, priced at a fixed rate of six percent per annum.

SMIC vice president for investor relations Cora Guidote said the issue was well anchored by the domestic bid, with about 65 percent going to Filipino investors and 35 percent to the rest of the world.

She said the strong offshore and onshore bids resulted in an oversubscribed issue, reflecting the strong appetite for Asian borrowers with strong credit and a compelling story.

 “We thank the investors for their continued support of our bond issue and their confidence in SM’s ability to meet its medium-term goals. There is reason for us to be more optimistic on near-term prospects now that the global economy appears to be stabilizing and recovering from the recent financial shake up,” Harley Sy, president of SMIC, said.

SMIC is one of the largest holding companies in the Philippines with a market capitalization of $3.8 billion as of end June this year. It reported a 14 percent growth in its first half net income this year to P7.4 billion in spite of a challenging business environment.

Consolidated revenues rose 12 percent to P74 billion, resulting in an

improvement in net margin from 9.8 percent a year earlier to 10 percent this year.

SMIC plans to use the proceeds of the bond issue for general corporate purposes, which include refinancing of some of its maturing obligations.

SMIC is the dominant player in Philippine retail, mall operations and banking. It is also an emerging player in residential, commercial property, resorts and hotel development.

For the rest of the year, SMIC is spending P16 billion for its capital expenditures including the opening of 12 retail stores (one department store, one supermarket, six Save More and four hypermarkets), six new residential projects and construction of a Raddison Hotel and a sports arena at the Mall of Asia in Pasay City.

Plans also include the establishment of its first budget hotel in Bacolod.

Estimated to cost P400 million, excluding the land, the 150-room boutique hotel is expected to be operational in 2011. The world-class sports arena is scheduled to open in 2012.

With its strong cash flows and debt-free operations, SMIC’s retail business is considered as the group’s cash cow. Dividend income in 2008 from the group’s retail subsidiaries amounted to P3.1 billion, accounting for 55 percent of SMIC’s dividend income for the year.