Petron to issue $250-M hybrid notes

MANILA, Philippines - Fresh from raising $500 million in new funding, oil giant Petron Corp. is set to generate another $250 million through the issuance of hybrid notes for its refinery expansion program.

“This is to advise that the company has priced the offering Wednesday night with an issue size of $250 million and expected issue date of March 11, 2013,” Petron told the local bourse.

The notes, which carry a yield of 6.551 percent, will be consolidated with and form a single series with the $500-million securities issued on Feb. 6.

“The transaction was executed nimbly against a strong market, with positive sentiment buoyed on the back of the Dow Jones touching a record high the previous day in the US,” the Hongkong and Shanghai Banking Corp. (HSBC) said.

HSBC, Deutsche Bank, Standard Chartered and UBS were tapped as joint bookrunners and lead managers for the largest offshore perpetual in the Philippines.

HSBC said the order books were oversubscribed, with total demand reaching $2.5 billion from more than 150 accounts.

“A tap of the hybrids made sense for both investors who are looking for more Petron exposure, and for the issuer to raise cost effective funding to support its refinery master plan,” said HSBC Philippines president and CEO Wick Veloso.

Early last month, the country’s largest oil refiner completed the sale of $500 million worth of dollar-denominated securities.

Proceeds of the activity would be used to fund the company’s capital expenditures program, Petron president Eric Recto said earlier.

Specifically, it will back up the construction of a new cogeneration power plant in Bataan that will replace some of the Limay refinery’s existing turbo and steam generators.

“The cogeneration power plant will completely fulfill the Limay refinery’s current and expected future electricity and steam requirements and is expected to reduce the company’s refining costs,” Petron said.

The company is undertaking a $2-billion refinery expansion project at its 180,000 barrel-per-day Bataan refinery which is expected to be onstream in the last quarter of 2014.

In January to September 2012, Petron’s consolidated net income plunged to P932 million from P7.6 billion a year earlier, largely on depressed margins in the global markets. The company also said its consolidated net income of P500 million in the third quarter was down 68 percent from P1.56 billion a year earlier.

Food-to-power conglomerate San Miguel Corp. owns 68 percent of Petron, the Philippines’ largest oil refining and marketing company.

San Miguel, in the last few years, has diversified its core portfolio of food, beverage and packing by expanding its participation in industries such as petroleum, power generation and distribution, mining and infrastructure.