Filinvest Land shelves P3-billion retail bond issue

CEBU, Philippines - Filinvest Land Inc. (FLI), the real estate unit of the Gotianun family, has shelved its plan  to issue an additional P3 billion worth of fixed-rate retail bonds.

In a disclosure to the Philippine Stock Exchange, FLI said it has decided to postpone its planned bond flotation since it would be cheaper for the company to finance its projects by drawing on its bank lines and rediscounting part of its P6-billion unrediscounted  receivables.

FLI pointed out that the company’s internal cash generation “is very strong, thus reducing the need for such debt funding at this time.”

“The resumption of the flotation will be announced accordingly in the future,” FLI added.

The planned P3 billion bond issue had earlier been assigned the highest credit rating of PRS Aaa by domestic ratings agency PhilRatings.

Obligations rated PRS Aaa are of the highest quality with minimal credit risk as the  obligor’s capacity to meet its financial commitment on the obligation is extremely strong, Phil-Ratings explained.

FLI earlier issued P5 billion worth of bonds comprising P500 million due in 2012 and P4.5 billion due in 2014. The first bond series was similarly assigned a rating PRS Aaa in October 2009.

The rating took into consideration the following key considerations: strong growth of FLI’s real estate and leasing operations; its improving cash generation; conservative debt position; and financial flexibility.

The rating also reflects the following factors which were considered when the PRS Aaa  rating was assigned to FLI’s P5-billion bond issue last October 2009: FLI’s diversified portfolio; focus on the mass housing segment which enhances FLI’s resilience; and  favorable industry conditions. Despite having to face a more challenging environment

brought about by the global financial crisis and relatively weak GDP growth in the country, FLI’s revenues for the first nine months of 2009 were generally unchanged from the same period the previous year.

The slight drop in real estate revenues, brought about by the overall decline in high-end property sales experienced industry-wide, was offset by the slight increase in FLI’s rental

income. Although expenses were slightly higher, net income managed to register a 4.2-percent increase as a result of the lower corporate tax rate.

The company is expected to post increased growth from 2010 to 2015. Forecast hikes in  real estate revenues will come from the strong performance of the affordable, middle-income and high-end segments.

Mid-rise buildings such as One Oasis-Cebu, One Oasis-Davao, One Oasis-Ortigas, Bali  Oasis and the company’s first high-rise building, The Linear, will generate bulk of future revenues.

Rental income is also expected to augment FLI’s revenue generation, although at more modest growth levels. The improvement in leasing operation results will come from additional lease area and rental escalations.

FLI is also expected to benefit from the earnings potential of Cyberzone Properties Inc.’s (CPI) business process outsourcing (BPO) buildings through its acquisition of Africa-

Israel Properties (Phils.) Inc.’s 40 percent stake in CPI.