In its letter to the Philippine Stock Exchange, Ayala Corp. officials said the proceeds of the loan will be used to "refinance the company’s maturing debt obligation in 2003."
"Ayala Corp. continues to receive attractive proposals for credit from several financial institutions...the execution of such loan transactions is part and parcel of Ayala Corp.’s ordinary course of business," the officials said.
The two-tranche loan will have a fixed rate for the first five years with Insular Life funding P700 million of the total amount. The rest were contributed by Insular’s own units Insular Life Savings & Trust Co.and Insular Investment & Trust Corp.; Chinatrust Philippines Commercial Bank Corp., the Bangko Sentral ng Pilipinas (BSP) Provident Fund, Pioneer Allianz Life Assurance Corp. and the Land Bank of the Philippines
Ayala said the loan will suffice for refinancing the company’s debt amortization scheduled for next year. As of end-2001, the company had a 12.5-percent syndicated term loan worth P1 billion due next year.
Due to its prudent debt management strategy and healthy earnings position, Ayala Corp. and its subsidiaries have managed to stay out of the debt squeeze suffered by other local big companies, even though its long term loans stand at over P43 billion at end-2001.
"Other financing possibilities are currently being explored in order to take advantage of the improving market conditions and lower financing costs available," Ayala officials said.
Taking advantage of these facilities will allow the company to maintain a lower level of cash on its balance sheet, lower its interest costs and improve its debt maturity profile even further, they added.
In the first nine months of 2002, Ayala Corp. reported an unaudited consolidated net income of P2.65 billion or five percent higher than the P2.52 billion recorded for the same period last year. Its earnings were driven by its main subsidiaries and affiliates, led by Bank of the Philippine Islands, Globe Telecom and Ayala Land, which delivered steady results amid difficult business conditions.