Tuesday, 2 June 2009

Investors expected to swamp SM bonds


Sy-led SM Investments Corp.’s plan to raise up to P10 billion from bonds has generated significant interest according to the lead underwriter, with the issue deemed "oversubscribed" on the first day of a road show.

"We feel that there is a strong demand for the seven-year bond from insurance companies and banks, [so] our efforts are now more focused on the five-year bond which we will offer to retail investors," said Eduardo V. Francisco, head of BDO Capital and Investments Corp., the investment banking unit of Banco de Oro Unibank, Inc. which is controlled by the family of Henry Sy.

Mr. Francisco said this is the reason why the bond will be sold for eight business days instead of the usual five working days starting next week.

SM Investments is also going to Cebu City and Davao City today and tomorrow to attract potential investors in the provinces.

Last week, the group secured the approval of the Securities and Exchange Commission to offer P5 billion in fixed-rate bonds, with a provision to sell P5 billion more in case of an oversubscription.

The bond will be issued in two tranches maturing in five and seven years, which will carry a 7.75% to 8.25% and 8.6% to 8.9% interest per annum, respectively.

The bonds, which could be bought for a minimum of P20,000 and in multiples of P10,000 thereafter, represents SM Investment’s first time to sell bonds to the public, having opted to borrow from large financial institutions before.

Proceeds will be used for the group’s three-year expansion, with projects like the Two E-Com Building, Radisson Hotel, Arena Coliseum and the expansion of the SMX Convention Center at the SM Mall of Asia; the planned SMX Convention Center in Cebu and the SM Cebu Radisson Hotel; and for another hotel.

Merril F. Yu, senior vice-president of SM Hotels Corp., said Radisson Cebu would open in December.

The proposed arena will be able to accommodate at least 12,000 people. Expansion will also add another 10,000 square meters to the SMX Convention Center’s 40,000-square-meter gross land area.

"This is going to be a big project. We plan to start the construction of the arena next year," Mr. Yu said.

Mr. Yu said there are still no specifics for a plan to build budget hotels, but the idea is to have 50 to 150 rooms per hotel depending on the location.

SM is now involved in five core businesses: retail and wholesale, mall development, banking and financial services, property development, and hotel and entertainment.

SM Investments Chief Finance Officer Jose T. Sio said the company has no plans to slow down on expansion as the group wants to be "well-positioned" when the economy recovers.

Shares in SM Investments dipped by 4.47% or P15 to P320 apiece yesterday.

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