P20-billion San Miguel Brewery bond issue gets top credit rating

San Miguel Brewery Inc.’s proposed bond issue worth up to P20 billion was assigned a PRS Aaa rating by domestic credit rating agency Philippine Rating Services Corp. (Philratings).

“Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligations is extremely strong,” Philratings said.

The proposed bond issue will be paid in three tranches: payable in three, five and 10 years. Proceeds will be used to fund the acquisition of local beer brands and land worth P38.8 billion from parent firm San Miguel Corp.

In assigning the rating, Philratings took into account SMB’s market leader position, experienced management and production team, as well as continued positive although moderated growth for the beer industry amidst weak economic prospects and conditions. Also considered were sustainable improvement in SMB’s earnings, its strong cash flow generation and managed debt utilization, and the company’s demonstrated financial flexibility.

SMB continues to strengthen its leadership in the Philippine beer industry, shoring up its market share from 91 percent in 2000 to 95 percent in 2007.

Philratings said the company’s market leadership will continue to be supported by its strong and popular brand portfolio, well-defined growth strategy, the proximity of its production facilities to consumer markets, as well as its extensive and efficient distribution system.

SMB’s management team has solid experience, having steered the company through periods of economic crisis and instability. Many of the company’s senior managers have been with SMB for an average of 20 years. 

Despite the current uncertain outlook for the country’s economy, consumption and sales of alcoholic drinks are projected to increase going forward. In terms of types of alcoholic drinks, beer will continue to account for the largest share of the alcoholic beverage market, Philratings said.

SMB’s beer brands San Miguel Pale Pilsen, Red Horse, San Mig Light and Gold Eagle are among the top four brands in the country. It also offers popular brands such as Super Dry, Cerveza Negra, San Mig Strong Ice, Gold Eagle and Cali, the country’s only malt-based non-alcoholic drink. – Zinnia dela Peña