Ayala increases bond offering to P8 billion

REPORT FROM BUSINESSWORLD PUBLICLY LISTED conglomerate Ayala Corp. is increasing its bond offering by P1 billion to P8 billion, proceeds of which will be used to refinance obligations. In a disclosure to the stock exchange, the holding firm said it has filed a new registration statement before the Securities and Exchange Commission reflecting the P1-billion increase in its bond offering. "The Board of Directors has approved the amendment of the offering size to a principal amount of P5 billion with an option to increase of up to P8 billion, instead of up to P7 billion as earlier reported," the company said in its disclosure. To mature within five years, the bonds’ coupon rate would be fixed based on Philippine Dealing System Treasury-Rate 2 (PDST-R2) benchmark plus spread. Ramon G. Opulencia, Ayala Corp. treasurer, had said earlier this month that the proceeds of the bonds would be used to refinance peso-and US dollar-denominated obligations. "Ayala has already prepaid about P8 billion worth of obligations since the start of the year, generating savings of about P500 million for the remaining life of the loans," he said. The company, Mr. Opulencia said, will also prepay an additional P7 billion worth of obligations this month, saving the company at least P700 million. Ron Rodrigo, research head at Unicapital Securities, Inc., said the increase in bond offering could be attributed to the increased demand from creditors. "Maybe there are a lot of creditors willing to lend them more; that’s why the increase [sic]. These creditors might want a secured return since their risks are low and, at the same time, they are speculating that rates may move higher in the future," he said. Analyst Claire Quiray from Accord Capital Equities Corp. echoed this view, saying, "There could be a miscalculation in the previous disclosure or there are just a lot of creditors who expressed interest since Ayala Corp. can easily pay that back." While Ayala did not explain the reason for the increased offering, another analyst, who declined to be identified, said the company could be needing more cash as a result of the blast that destroyed Glorietta 2 on Friday last week. "It could be that they need money to fund the restoration of Glorietta 2 and pay their obligations to those who were hurt." Ayala Corp. is the parent company of Ayala Land, Inc., the developer of the Ayala Malls in Makati, of which Glorietta 2 forms part. Besides malls, Ayala Land develops residential and business office buildings. In a press conference held at the hotel InterContinental Manila on Wednesday, Ayala Land spokesman Alfonso Reyes, speaking beside company President Jaime I. Ayala, said earnings from Glorietta 2, which had sustained damage worth at least P100 million from the blast on Friday last week that killed 11 people and injured at least 100 others, contributed just two percent to Ayala Malls’ total revenues. Ayala Malls, in turn, Mr. Reyes added, accounted for about 17% of Ayala Land’s revenues. Ayala Corp. shares on Wednesday closed higher by 4.46% at P25 to P585. — Lovely Nica P. Lee/BusinessWorld