Ayala Corp buys back P6 B worth of preferred shares

MANILA, Philippines - Ayala Corp. (AC), the country’s oldest conglomerate, has opted to buy back P6 billion worth of preferred shares well ahead of maturity.

In a regulatory filing, AC said its board of directors approved the early redemption of its Preferred “A” shares.

“The exercise will be made on Nov. 25, 2013 or the fifth year from listing date of the shares,” AC said.

The preferred shares are redeemable on the fifth anniversary from the listing date. If the shares were not bought back, the dividend rate would be adjusted to the higher of the dividend rate or the 10-year fixed rate treasury note benchmark yield plus a spread of 0.0088 percent.

For the buyback program, AC said it would pay in cash 100 percent of the preferred shares’ issue price or P500 apiece. The preferred shares were last traded on Friday at P518 each, for a total market capitalization of P6.204 billion.

The conglomerate said it would also pay all accrued and unpaid dividends until Nov. 25, 2013 based on the dividend rate of 8.88 percent per annum.

The redemption allows Ayala to lower its funding cost and avail of cheaper sources of funds.

In 2008, AC raised P6 billion when it sold 12 million preferred shares at P500 apiece. The flagship holding firm of the Ayala Group was originally looking at selling only eight million shares but it availed of the over-allotment option given robust domestic demand.

Proceeds from the share sale were used to increase AC’s direct investments in business process outsourcing (BPO) units eTelecare Global Solutions Inc., Affinity Express Inc. and Integreon Management Solutions Inc.

It also funded the construction of the BPOs some of which are in the University of the Philippines-Ayala Land Technohub in Quezon City.

In the first quarter, AC’s earnings hit P4.5 billion, up 29 percent from a year ago supported by higher income from its banking and property businesses.

So far, the conglomerate, which was incorporated in 1968 is into real estate (Ayala Land Inc.), banking (Bank of the Philippine Islands), telecommunications (Globe Telecom, Inc.), utilities (Manila Water Co. Inc.) and electronics (Integrated Microelectronics Inc.).

For this year, Ayala Corp. allotted P135 billion in capital expenditures that will bankroll investment programs in the property, telecommunications and water businesses. It will also support investments in the power and transport infrastructure sectors.

The conglomerate committed to invest up to $1 billion over the next five years for the capital intensive but high-yielding power and infrastructure sectors.