JP Morgan expects more IPOs, bond issuances next year

MANILA, Philippines – J.P. Morgan Chase & Co. sees more initial public offerings (IPOs) and bond issuances next year as companies continued to grow on the back of a robust economy.

In an interview with The STAR, J.P. Morgan executive director and head of banking Carlos “Caloy” Mendoza said the Philippines has a good macroeconomic story, which creates a lot of opportunities for companies.

“Because the underlying economy is strong, it creates opportunities. For instance, let’s start with the banks. We now have a very robust capital market. It’s great because now there’s liquidity for companies to borrow in peso, in size in tenor, and that creates safer companies and companies that are safer have the capability to invest more,” Mendoza said.

However, Mendoza stressed a number of things have to come together in order for the environment to stay conducive for such capital-raising activities.

“We might have a couple for next year. Things have to come together for (companies) to decide,” Mendoza said.

J.P. Morgan, together with local underwriters, handled two big-ticket IPOs this year by local units of multinational companies. These are the P25-billion IPO of Cemex Holdings Philippines, the local subsidiary of Mexican cement giant Cemex, and the P18.4-billion IPO of Pilipinas Shell Petroleum Corp., the Philippine unit of energy company Royal Dutch Shell.

“I’m hoping that because of these deals, (other companies) would decide to do it,” Mendoza said.

But he noted global volatility has to stabilize.

In the end, he said, the owners have to decide what is good for the business.

“A number of things have to come together. The owners of these companies have to understand the underlying business has to have a driver. Tapping the capital markets by going public is a tool to grow one’s business and that comes with pros and cons. You have a ready source of capital. You get an incremental driver to have financial discipline.  On the other hand you spend a lot of money on regulatory reporting. You need to spend more on compliance,” Mendoza said.

Aside from handling the capital-raising activities of companies, J.P. Morgan has raised capital for banks in the Philippines.

“Every time an economy is strong people will need capital to invest in a good way. What we found is that people turn to a company like J.P. Morgan and go where we add most value,” Mendoza said.

Since joining the firm in 2008, Mendoza has completed more than 40 transactions, including landmark transactions in the banking, energy, transportation, telecom and consumer sectors along with the three largest-ever Philippine IPOs, largest equity and bond offerings and largest M&A transaction.

J.P. Morgan began operations in the Philippines in 1961. Since then, the firm has expanded its presence into a fully integrated franchise, comprising of investment banking, treasury and securities services, equity sales and research as well as foreign exchange and fixed income.