In a disclosure to the Philippine Stock Exchange, Petron said it received bids amounting to P11.2 billion, an over subscription of nearly four times.
Petron said the notes fetched a price of 8.875 percent, lower than the prevailing market rate of notes with the same tenor. The issue has achieved the distinction of being the largest peso private placement and the lowest priced corporate issue of its kind, the company added.
BPI Capital Corp. and ING Bank N.V. arranged the deal.
Commenting on the corporate note issuance, Petron chairman NIcasio Alcantara said: "We are extremely happy with our arrangers who demonstrated deal savvy and a deep appreciation of the market by structuring and pricing this landmark transaction in a volatile market. The strong response to our notes issue reflects the trust and confidence of the investment co the long term. We define our leadership not only in terms of market share of revenue but also in the areas of governance and transparency."
Proceeds from the issuance will be used to finance the company’s petro-fluidized catalytic cracker being constructed at its Bataan refinery. The facility will allow Petron to produce more high-value white products and extract the petrochemical propylene.
Petron will also construct an additional refinery unit for the extraction of other petrochemicals, namely benzene and toluene, and the expansion of its mixed xylene production capacity.
The units, which are expected to significantly contribute to the company’s bottom line, will be commissioned in February 2008.
"Given the demand and supply imbalance for petrochemicals, we are very optimistic that these projects will sustain our growth momentum for years to come, "said Petron president and chief executive officer Khalid Al-Faddagh.
Petron’s P5.5-billion long-term borrowing has a PRS Aaa rating from the Philippine Rating Services Corp.
A rating of PRS Aaa is given to debt obligations with the "smallest degree of investment risk. In particular, interest payments are protected by a large or by an exceptionally stable margin and principal is secured.
Also, while the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
A PRS Aaa is the highest rating that can be assigned on the Philratings rating scale.
In assigning the rating, Philratings considered Petron’s solid market leadership in the domestic fuels market; sustained earnings and cash flow generation providing strong coverage of interest and debt service; sound diversification strategy; reliable crude supply from Saudi Aramco; the company’s moderate debt profile; and its diverse funding sources which boost the company’s financial flexibility.
"Prevailing risks such as declining domestic petroleum consumption, as well as continuing, highly probable fuel cost escalation were likewise taken into account and management is seen to have put measures in place to manage such risks going forward," Philratings said.
"Revenues from domestic sales appear well assured with Petron’s continuing dominance in the market – a commanding 38 percent market share – made secure by an extensive sales and distribution infrastructure, continuing product and market development efforts, a valuable brand name and not the least, a demonstrated fierce competitive spirit that permeates the organization," Philratings said.