Stocks of the Gotianun-controlled FLI took centerstage in last week’s trading as these zoomed to the top spot of the most active list for three consecutive days.
This as the company announced last Wednesday that it will issue P1.2 billion worth of convertible bonds to a foreign institutional investor, later on identified as Reco Grandhomes Pte. Ltd., a company managed by GIC Real Estate Pte. Ltd. of Singapore.
But the announcement took investors by surprise since the bonds can be converted into common stocks at any time within five years from date of issuance at the option of the holder at an initial conversion price between P1.70 to P1.875 per share, way below the stock’s prevailing market price.
From P2.38, FLI shares steadily slid below the P2-mark. Last Friday, trading in FLI shares was temporarily halted to check its skid while awaiting the market’s appreciation of the company’s explanation on the lower price valuation. By the end of the session, the stocks slightly recovered to end four centavos higher at P1.98.
The company said the formula for the price conversion was arrived at even before Christmas last year, following a 30-day share price track record. However, the formal agreement was only signed and disclosed last Feb. 5, when the share prices had significantly advanced along with the overall runup in the market.
FLI said the proceeds of the convertible bonds were used to partly pay and retire $100 million in company-guaranteed convertible bonds issued in 1996 by its wholly-owned foreign subsidiary FLI Capital (Cayman Islands) Ltd.
As a result, FLI said its had completely eliminated its foreign currency exposure and has significantly brought down its total borrowings from P8 billion to P3.5 billion.
FLI president Joseph Yap said the sale of the P1.2 billion bonds together with the sale of their installment receivables was part of a fund raising program designed to meet their financial obligations.
"By issuing convertible bonds, there is a greater possibility of increasing our equity base and reducing our reliance on debt, reducing interest cost and increasing future earnings," Yap said.
He added that aside from raising the needed funds, the bond issue will allow FLI access to the regional property market with its partnership with a global real estate investor.
Reco Grandhomes is a Singaporean investment company managed by GIC Real Estate, a subsidiary of the Government of Singapore Investment Corp. Pte. Ltd. which already owns 500 million shares or about 12 percent of FLI.