Tanduay seeks SEC okay for P4-billion bond float

MANILA, Philippines - Tanduay Distillers Inc. (TDI), the liquor unit of tobacco and airlines tycoon Lucio Tan, formally filed with the Securities and Exchange Commission (SEC) its appli-cation for the issuance of P4 billion worth of fixed-rate bonds.

In the event of oversubscription, the company reserves the right to raise the issue size by P1 billion or to P5 billion.

TDI has tapped Allied Banking Corp., First Metro Investment Corp. and PNB Capital & Investment Corp. as joint lead managers for the issue.

Proceeds from the issue will be used to refinance maturing obligations and for general corporate purposes.

The bonds have been rated AAA by Credit Rating and Investors Services Philippines Inc. (CRISP) having considered the company’s strong Tanduay brand equity, solid operation and strong financial performance as indicated by historically strong gross profit averaging 21.4 percent and average net income of 10.6 percent over the last five years. AAA is the highest available rating that indicates strongest capacity and very low probability of default by a debt issuer.

TDI controls over 95 percent of the local rum market and is the second largest seller of rum in the world next to Bacardi of Puerto Rico. It operates four liquor-bottling plants with a total capacity of about 120,800 cases per day and operates two distillation plants.

Its parent firm Tanduay Holdings Inc.  is eyeing a net income of between P300 million and P400 million on the back of a projected five percent rise in sales volume this year.

Based on a survey conducted in 2007, Tanduay held a 30-percent liquor market share while the leading rival accounted for 40 percent of the market with the remaining 20 percent held by Emperador Brandy.

Last year, Tanduay reported a more than three-fold increase in its net earning mainly due to higher sales and effective cost-saving strategies. From a meager

P100.6 million in 2007, Tanduay’s net income rose to P338.2 million.

Net sales, on the other hand, on the other hand, grew 18.3 percent to P9.05 billion from only P7.65 billion, helped by price adjustments and sustained advertising and promotional campaigns.

Sales volume rose 14 percent as a result of the favorable economic performance in Southern Philippines, the company’s market stronghold.

Five Year Rum brand continued to lead all brands capturing 79 percent of total sales.

The opening of a new production facility in Cagayan de Oro, Misamis Oriental also contributed to the sales growth as its products are more accessible and readily available in the Mindanao region. The CDO plant currently serves 50 percent of the region’s requirements.