SMB to amend terms of P38.8-billion bond issue

MANILA, Philippines - San Miguel Brewery Inc. (SMB) said it has obtained consent from bondholders representing, 76.92 percent of the total P38.8 billion fixed-rate bonds issued in 2009, to amend certain terms of the convenant.

In particular, bondholders have consented to the replacement of the minimum current ratio (current assets/current liabilities) of 1:1 in the terms and conditions of the bonds, with a minimum interest coverage ratio (EBITDA/interest expense) of 4.75:1.

With bondholders approving the replacement, SMB and the trustee executed yesterday the supplemental agreement amending the trust agreement for the Bonds.

SMB said the consent fees will be paid to the consenting bondholders within three business days from the execution of the supplemental agreement and such agreement will take effect upon payment of said fees in accordance with the consent solicitation statement.

SMB said it believes that the minimum interest coverage ratio is a more appropriate measure in monitoring the financial health of the company as it gives an indication of whether SMB has sufficient margin in operating profit to cover increases in the cost of debt.

It is believed to be a stronger measure of protecting the interest of lenders, as it provides an early sign of the company’s ability to manage liabilities.

SMB, which accounts for 96 percent of the local beer market, is 51 percent owned by diversifying conglomerate San Miguel Corp. and 49 percent by Japanese brewer Kirin Holdings.

SMB is putting up four new bottling facilities in Laguna, Isabela, Bicol and Cayagan de Oro worth about $100 million this year. These plants are seen to boost the company’s bottling capacity by 30 percent.

Overseas, the company plans to set up brewery plants in Laos and Cambodia.