Ayala Corp. managing director Renato Marzan told the Philippine Stock exchange that the company’s board of directors approved last week the issuance of the redeemable preferred "AA" shares to be underwritten by subsidiary BPI Capital Corp.
Like common stocks, preferred shares also represent ownership in a corporation but these are given priority in the grant of dividends. However, preferred shares usually have a specified dividend rate, redemption period and liquidation price unlike the common shares.
Under the terms of the offer, Ayala’s preferred "AA" shares will be priced at P5 each with a dividend based on the floating rate of the 91-day Treasury bills. The shares will have a five-year term.
At the end of the five-year period, the shares are redeemable in full via payment in cash of 100 percent of the issue price. However, on the third year, the shareholders can exercise the so-called put option which would involve the right to sell the outstanding preferred shares to Ayala at the price equivalent to the sum of the aggregate issue value plus all accrued and unpaid dividends.
The shares are not convertible to common shares and have no participating or voting rights, including preemptive rights isue.
Ayala Corp. earlier floatd at the PSE an initial tranche of P1.075 billion worth of cumulative convertible preferred "B" shares at a fixed five percent rate of return.
Several other firms have their own preferred shares listed at the PSE, including PLDT, Allied Bank, Banco Filipino, Benguet Corp., and the Concepcion-owned companies RFM Corp., Cosmos-Bottling, and Swift Foods.
Ayala Corp., the holding firm for the Ayala Family’s various business concerns, reported a 38-percent drop in its net income last year due to the overall economic weakness that cut down on the profitability of its two major subsidiaries.
Based on unaudited consolidated income for the year 2000, Ayala Corp. earned P3.15 billion, down from P5.11 billion in 1999. Although telecom unit Globe Telecom and food arm Pure Foods Corp. posted higher profits, this were largely offset by the heavy drop in income of the main subsidiaries Ayala Land and Bank of the Philippine Islands.
Despite the sale of Pure Foods to San Miguel Corp. this year, the Ayala group remains widely diversified with stakes in other businesses like hotels (Ayala Hotels); agribusiness (Ayala Agricultural Development Corp.); electronics and information technology (iAyala, Ayala Systems Technology Inc., EDINet Philippines, Integrated Microelectronics); insurance (Ayala Insurance); utilities (Manila Water Co.); automotive (Honda Cars Philippines); industrial park (Cebu Holdings); and retail (Pilipinas Makro).