AYALA Corp. (AC) is looking for a possible dollar-investment as part of the proceeds of its $400-million perpetual, no step-up bond float, whose structure the company claims is the first in Southeast Asia.
Jose Teodoro K. Limcaoco, the company’s CFO, said half of the proceeds of the bond will be used to finance maturing debt and the other half will be to fund an US-dollar investment.
“Dollar investment doesn’t have to be overseas. For example, if that’s the energy sector, that’s tied to the dollar. IMI [Integrated Micro-electronics Inc.] is a dollar revenue,” Limcaoco said. “So, in the case of IMI, it may [be operating] in the Philippines, but the customers are all overseas. So it’s dollar revenue.”
IMI is a unit of Ayala.
Limcaoco said its paper is a unique structure and “very hard to do” that only an “impeccable” creditor can pull off.
“It’s very rare and the name has to be highly respectable. Because there’s no way that you’ll get your money back,” he said. “Investors will have to believe that the company will be around forever. It’s a discussion in the banks.”
Ayala’s bond is fixed for life, which means there is no maturity on the debt and the coupon rate will never change. There will also be no step-up or reset on the deal.
“We’re not the first in Asia. Some Chinese companies…, some Hong Kong companies have done it. But we’re the first in Southeast Asia,” Limcaoco said. “Well, the fact that we’re able to do it, I think we can do it again if we wanted to.”
The company said the paper has an annual coupon of 5.125 percent for life with no step-up.
The pricing of the notes reflected a 50-basis point compression from initial price guidance, it added.
The offering was more than five times over-subscribed reaching $2.5 billion, with investors’ confidence reflecting the high quality of the Ayala signature.
Some 19 percent of the order book for the notes was allocated to investors from the Philippines, 10 percent from Europe, with the remaining 71 percent from rest of Asia.
By investor type, the split was 67 percent to fund/asset managers, 12 percent to banks, 7 percent to insurance and pension funds and the remaining 14 percent to private banks and other investors.
The transaction is expected to settle on September 13.
“This successful launch of fixed-for-life notes provides us with the financial flexibility to manage our balance sheet and diversify our sources of capital,” Ayala Corp. Chairman and CEO Jaime Augusto Zobel de Ayala said in an earlier news briefing. “We are grateful for the continued support we have received from our investors that is clearly reflected in
this issuance.”
Hongkong and Shanghai Banking Corp. Ltd. acted as global coordinator and Deutsche Bank A.G. Singapore Branch, HSBC and J.P. Morgan Securities Plc. acted as joint lead managers.
BPI Capital Corp. and Chinabank Capital Corp. were the domestic lead managers.