JG Summit eyes P10 billion from fixed-rate bonds

MANILA, Philippines - JG Summit Holdings Inc., the flagship investment holding firm of the Gokongwei family, is eyeing up to P10 billion from the sale of five-year fixed rate bonds.

In a registration statement filed with securities regulators, JG Summit said it is issuing P5 billion worth of bonds at 100 percent face value, with an oversubscription option of an additional P5 billion.

The bond issue is expected to take place on or before Nov. 12, 2009.

ING Bank N.V. Manila Branch and SB Capital Investment Corp. have been tapped as joint issue managers and lead underwriters, while BDO Capital & Investment Corp., BPI Capital Corp., China Banking Corp., First Metro Investment Corp., Hongkong & Shanghai Banking Corp., Rizal Commercial Banking Corp. will serve as underwriters for the offering.

Proceeds from the offering will be used to support the capital expenditure requirements of JG Summit’s subsidiaries, particularly Digital Telecommunications Phils. Inc (Digital) and Cebu Air (P2 billion to P4 billion).

Digitel, which provides voice and data services through wireless and wireline technology, needs between P6 billion to P8 billion from 2009 to 2011. It is the country’s third largest provider of wireless public and private telecommunications services through Digitel Mobile Phils. Inc. (DMPI), which offers the Sun Cellular brand.

DMPI is currently at the eighth phase of its network expansion, which includes Phase 2 of 3G cell site roll-outs in NCR, North Luzon and VisMin. It has projected total capital expenditure of $280 million by yearend, $222 million in 2010 and $184 million in 2011.

DMPI plans to fund these capital expenditures using a combination of bank loans, internally generated funds and advances from JG Summit.

Airline unit Cebu Air, on the other hand, has budgeted around P4 billion this year and P4.9 billion in 2010 to support its fleet expansion program. It signed a purchase agreement for up to 20 additional new Airbus A320-200 aircraft comprising of 15 firm orders and five purchase options. The 15 firm orders are scheduled to be delivered starting 2010.

Aside from this, Cebu Air, which operates the Cebu Pacific fleet, will take delivery of two more ATR 72-500 turboprop aircraft in the fourth quarter of 2009 to cater to domestic destinations with smaller airports.

Other proceeds from the bond offering will be used for repayment of short-term debt, which stood at P22.5 billion as of June 30 this year.

JG Summit also intends to use a portion of the proceeds for investments in short-term instruments such as special savings, trust accounts or fixed income bonds, until such time that the funds need to be deployed for capital expenditure requirements of subsidiaries.

JG Summit expects 2009 to be a banner year, taking out non-recurring gains.

Revenues are forecast to grow 15 percent to 20 percent this year with EBITDA (earnings before interest, taxes, depreciation and amortization) reaching P29 billion to P30 billion from P25 billion in 2008.