SM Investments Corp. (SMIC) said it has successfully listed $500 million in debt notes on the Singapore Exchange Securities Trading Ltd.
This issuance is part of SMIC’s $3-billion multi-issuer euro medium-term notes (EMTN) program launched in May, the company said in a disclosure on Thursday.
The conglomerate reported a 3.2x oversubscription, with final demand reaching $1.6 billion, marking its largest offshore bond issuance since 2014.
The notes were issued by SMIC’s wholly owned subsidiary, SMIC SG Holdings Pte. Ltd., incorporated in Singapore, and were backed by a guarantee from SMIC.
“Our establishment of the pioneer EMTN program allows us to efficiently access funding with flexibility, especially in times of volatility,” SMIC Chairman Amando M. Tetangco, Jr. said.
“We believe that the positive reception of this maiden issuance is a testament to the investability of quality Philippine corporates,” he added.
The five-year notes were priced at a yield of 5.466%, which is 135 basis points (bps) above the United States Treasury benchmark. The notes carry a coupon rate of 5.375%. The final spread represents a tightening of 35 bps from the initial price guidance.
In terms of location, 87% of the notes were distributed to Asia, while the remaining 13% were distributed to Europe, the Middle East, and Africa.
Among investor types, 83% of the notes were distributed to fund managers and asset managers, 11% to banks and financial institutions, and 6% to private banks and others.
Meanwhile, SMIC said the net proceeds from the EMTN issuance will be used for general corporate purposes.
HSBC, J.P. Morgan, Standard Chartered Bank and UBS have been mandated as joint lead managers and joint bookrunners, alongside BDO Capital and Chinabank Capital as joint lead managers.
In a separate report, financial research company CreditSights said that SMIC’s brand and track record, as well as diversified operations, are some of the conglomerate’s credit strengths in relation to the new five-year bond issuance.
“We recommend investors to participate but not expect significant tightening in the secondary market,” CreditSights said in a report authored by Lakshmanan R, Jonathan Tan Jun Jie, and Nicole Chua.
“SMIC’s earnings are diversified across the retail, property, banking, and various portfolio investment segments. This buffers the company from material downturns in any sector. All of SMIC’s segments are also aligned with the Philippines’ long-term macroeconomic growth prospects aided by rapid urbanization and rising disposable incomes,” it added.
CreditSights also said that SMIC has “sound leverage metrics” and a “good dollar bond repayment track record.”
“SMIC has exhibited a steady improvement in its net leverage metrics over the past three to four years. It has stayed in the 2.9x-4.4x range that indicates prudent financial management by the company,” CreditSights said.
However, CreditSights warned that SMIC faces high business risks across its core businesses in the retail, property, and banking segments.
“SMIC’s main verticals in retail, property, and banking inherently carry high business risks that make them more vulnerable to growth slowdowns… Although still a small earnings contributor, SMIC has portfolio investments in sectors that are relatively more defensive, including geothermal energy, copper mining, and logistics,” it said.
CreditSights also cautioned that SMIC’s free cash flows have been weighed by heavy capital expenditure (capex) and dividends, as well as structural subordination since the conglomerate has “little revenue-generating operations of its own, and is dependent on dividend income.”
SMIC has earmarked up to P115 billion for its capex budget this year to support expansion plans.
For the first quarter, SMIC’s consolidated net income rose by 6% to P18.4 billion as consolidated revenues increased by 4% to P144 billion.
On Thursday, SMIC shares fell by 2.28% or P21, ending at P902 apiece. — Revin Mikhael D. Ochave
