Ayala, Aboitiz conglomerates firm up fund raising plans

MANILA, Philippines - Two of the country’s top conglomerates have firmed up fundraising plans as they seek approval to tap the capital markets.

The fundraising programs will allow Ayala Corp. (AC) to pay existing debts while Aboitiz Equity Ventures Inc. (AEV) aims to replenish its working capital, the companies said.

In a registration statement filed with the Securities and Exchange Commission, AC said it will re-issue 20 million Preferred Class B shares at P500 apiece.

“The proceeds shall be used to partially refinance certain peso-denominated debt obligations due in the last quarter of 2013 totaling P10.25 billion,” AC said.

“Funding for the balance of these obligations will be sourced from internally generated funds and/or other credit facilities,” it added.

Specifically, AC will buy back next month P6 billion worth of Preferred Class A shares. It will also retire P4.25 billion worth of bank loans due December 2012.

The Preferred Class B shares were first issued AC in July 2006. Five years after, the company redeemed the Preferred B shares, which then were worth P5.8 billion.

“[AC] intends to build on its leadership position in its core businesses in real estate and hotels, financial services and insurance, telecommunications and water distribution and wastewater services,” the company said.

The conglomerate 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.).

The holding firm expects its domestic businesses to remain as the main sources of earnings and dividend income.

“AC is investing in new businesses particularly in the power generation and transport infrastructure sectors,” it said.

“In the medium term, AC expects its investments in the power sector to begin contributing to equity earnings in 2014,” it added.

AC said its international businesses are also projected to sustain improvements in profitability and drive more value despite a challenging global environment.

In the first half this year, AC’s net income hit P7.3 billion, up 20 percent from the same period last year as consolidated revenues expanded 21 percent to P74.6 billion.

For this year, AC 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.

For its part, AEV applied for the registration of its P10-billion retail bonds with tenors of seven and 10 years. As of end-June, AEV had no outstanding bonds.

“Proceeds of the offer will be used by the company to replenish working capital, for payment of the company’s short-term obligations and for planned investments and other general corporate requirements,” AEV said.

AEV, which is predominantly into power generation, is looking at joining Public-Private Partnership (PPP) projects like the P17.5-billion Mactan-Cebu International Airport and the 27.5-kilometer CALA Expressway.

“Although there are no definite transactions at this time, AEV is looking at major investment opportunities that build on its established competencies, including, but not limited to, the power generation and distribution, infrastructure, renewable fuels, and real estate sectors,” AEV said.

In the first half, lower selling prices of electricity and revaluation of dollar liabilities dampened the net income of the Aboitiz family’s investment holding firm.

AEV posted P11.9 billion in consolidated net income for the first half, up just one percent from P11.8 billion a year ago while first semester core net income grew 3.5 percent to P11.7 billion.

The conglomerate is into power production (Aboitiz Power Corp.), banking (Union Bank of the Philippines), food (Pilmico Foods Corp.) and property.