SMIC to issue P5-billion fixed rate corporate notes

MANILA, Philippines - SM Investments Corp. (SMIC), the listed flagship firm of retail tycoon Henry Sy Sr., is planning to issue up to P5 billion worth of five-year fixed rate corporate notes to refinance debt.

Informed sources said SMIC has tapped ING Bank as arranger for the issue targeted next month.   The facility shall be available via private placement to not more than 19 primary institutional lenders, sources said.

When asked to confirm the notes issuance, SMIC chief finance officer and executive vice-president Jose T. Sio said: “This is just a refinancing of existing debt as part of our debt management.”

 Sources said the issuance is tentatively scheduled to begin on Feb. 7 with the indicative interest rate at 6.7385 percent as of Jan. 25 this year.

Proceeds from the notes issuance will be used to refinance series 1 of the existing redeemable preferred shares, amounting to P4.3 billion maturing in 2012 and the balance for other corporate requirements.

SMIC earlier accepted $196.6 million in aggregate principal amount of existing bonds ($350 million due 2013 and $500 million due in 2014) to be swapped for dollar-denominated bonds maturing in 2017, which will carry a fixed coupon rate of 5.5 percent per year.

On top of the $213.7 million in bonds to be issued for the swap, SMIC agreed to issue additional seven-year bonds to new investors worth $186.3 million.

The offshore bond transaction was the first to be carried out by a Philippine corporation, which was 6.7 times oversubscribed.

SMIC has set a capital expenditure program of nearly P50 billion this year, up 22.9 percent from the P40.6 billion budgeted in 2010, as it aims to take advantage of a booming property market and steady inflows from Filipinos working/residing overseas.

Around P20.6 billion of this year’s total capex will be used to bankroll the group’s residential and office development projects while another P20.1 billion will go to the expansion of its mall business here and in China.

About P4.8 billion has been set aside for the establishment of more department stores, supermarkets and hypermarkets.

For its banking operations, the group is spending P3.4 billion to expand its presence in the industry.

The balance of P1 billion will be used to build new hotels, including its entry into the budget or mid-cost lodging business. By the first half of 2011, the group expects to have a total of 814 hotel rooms from only 260. This would comprise 260 rooms from Tagaytay-based Taal Hotel, Raddison Blu Hotel in Cebu (400 rooms) and Pico Sands in Nasugbu, Batangas (154 rooms).

SMIC is looking to sustain its positive performance with earnings seen to grow by 12 to 14 percent by the end of the year.