SMIC raises $300M from bond issue

SM Investments Corp. (SMIC), the listed investment holding company of retail tycoon Henry Sy, raised $300 million from a recent convertible bond issuance which was 10 times oversubscribed.

In a disclosure to the Philippine Stock Exchange, SMIC said the offer size was increased from $200 million due to a strong demand from foreign institutional investors.

The five-year convertible bonds fetched a yield to maturity of 3.5 percent per annum, based on zero coupon and a conversion premium of 22 percent. This compares with the current five-year US Treasury rates of almost five percent per annum and five-year Philippine Treasury bill rates of over five percent per annum.

The landmark transaction is the largest convertible bond to be issued by a Philippine company and the first in over 10 years.

Proceeds from the offering, which included the greenshoe option, will be used by the company to refinance some of its maturing obligations and for general corporate purposes.

"We are very pleased with the outcome of the exercise, which gave SM access to very cheap financing at a time when confidence in the Philippine economy runs high in the international financial markets," said SMIC president Harley Sy.

Citigroup and Macquarie Securities (Asia) Ltd. acted as joint lead managers of the bond issue.

SMIC has earmarked P20 billion for its capital expenditures this year, which include the acquisition of EPCIBank, the continued expansion of its mall, hypermarket and supermarket operations, and the development of its real estate properties.

Around P7 billion will go to the construction of new malls and refurbish three existing ones. Another P7 billion will go to the development of some properties, including a 5,700-hectare property in Nasugbu, Batangas, which the company plans to transform into an integrated network of coast resort communities.

SMIC needs P26 billion to finance its acquisition of EPCIBAnk which excludes the stake held by state pension fund Social Security System due to a case pending at the Supreme Court.

About 65 percent of the programmed capital budget will be sourced through internally generated funds while the balance of 35 percent will come from foreign borrowings.

SMIC posted a net income of P7.5 billion for the first nine months of 2006, up 38 percent from the previous level. Revenues, on the other hand, rose 18 percent to P45 billion. Excluding extraordinary items, net recurring income grew 22 percent.

Merchandise sales, still mainly from department stores, went up seven percent to P28.3 billion and accounted for 62 percent of total revenues.

Rental income, which accounted for 16 percent of revenues, increased by 14 percent to P7.5 billion while revenues from cinema operations expanded by 24 percent to P1.6 billion. Operating expenses, on the other hand, jumped 11 percent to P9 billion.