SM Brewery seeks changes in P38.8-B bond terms

MANILA, Philippines - San Miguel Brewery Inc. is seeking amendments to the terms and conditions of its P38.8 billion fixed rate bonds issued in 2009 by replacing the minimum current ratio with a minimum interest coverage ratio of 4.75.

In a statement, SMB said the minimum interest coverage ratio is a more appropriate measure in monitoring the financial health of the company as it gives an indication of whether SMB has sufficient margin in operating profit to cover increases in the cost of debt.

“It is believed to be a stronger measure of protecting the interest of lenders, as it provides an early sign of the company’s ability to manage liabilities,” SMB said.

 SMB said it would seek the consent of the majority of its bondholders for the replacement of the current ratio of one. All bondholders as of Dec. 8, 2011 are required to send in their comments or replies before Jan.y 20, 2012 and coordinate with their respective banks and brokers.

 In October, Philippine Rating Services Corp. maintained the existing PRS Aaa issue rating for SMB’s bonds. Obligations rated PRS Aaa are of the highest quality with minimal credit risk, with the obligor’s capacity to meet its financial commitment extremely strong.

In assigning the rating, PhilRatings took into account SMB’s strong market position domestically, experienced management and production team, with technical support from Japan’s Kirin Holdings Co. Ltd., high cash from operations and cash reserves relative to current debt, sustained financial flexibility and adequate capitalization.

Parent firm San Miguel Corp. owns 51 percent of SMB while Japanese brewer Kirin Holdings holds 48.4 percent.

SMB accounts for 96 percent of the Philippine beer market, which is expected to continue to grow in the low single-digit levels in 2011 and 2012 given robust consumer spending.

SMB is putting up four new bottling facilities in bottling plants in Laguna, Isabela, Bicol and Cayagan de Oro worth about $100 million this year. These plants are seen to boost the company’s bottling capacity by 30 percent.

Overseas, the company plans to set up brewery plants in Laos and Cambodia.