SM Prime to launch P20-billion bond issue in April

SM PRIME Holdings, Inc. is raising P20 billion next month to cover its capital spending that may amount to P55 billion by issuing the second tranche of its shelf offering.

The listed integrated property business of the country’s richest man Henry Sy, Sr. will issue bonds worth P15 billion and earmarked P5 billion for overallotment under its three-year debt securities program totalling P60 billion.

“We intend to launch by April 2017 and the proceeds will be used for capital expenditure requirements,” SM Prime VicePresident for Finance Teresa Cecilia H. Reyes told BusinessWorld on Monday through e-mail.

The planned bond issue represents the second tranche of the P60-billion shelf offering. In July 2016, the company listed the first tranche consisting of fixedrate retail bonds due 2026 in the amount of P10 billion.

In a separate statement, Philippine Rating Services Corp. ( PhilRatings) announced it assigned the highest rating of “PRS Aaa” with a “stable” outlook on the proposed debt papers.

The rating indicates the proposed bonds have the highest quality and minimal credit risk. It also reflects the “extremely strong” capacity of the company to meet its financial commitment on the obligation.

A stable outlook, meanwhile, suggests the rating assigned to the proposed debt will likely remain the same within the next 12 months.

“The rating reflects the following key considerations: SMPH’s strong financial profile; its solid brand equity and very good operational track record; SMPH’s well diversified portfolio, with components that complement each other; and its continuous aggressive construction and expansion of development projects, leading to significant growth going forward,” PhilRatings noted.

SM Prime is among the country’s biggest property developers with business interests in malls, residential projects, commercial developments, hotels and convention centers.

“With its continued aggressive construction, improvements and expansion, SM projects, particularly its mall developments, have consistently enjoyed a strong market presence,” PhilRatings said.

At end- December 2016, the listed company operated 60 malls spanning 7.66 million square meters in gross floor area across the Philippines. It intends to open four more between March and August: SM Luna Tuguegarao, SM Puerto Princesa, SM CherryAntipolo and SM Cagayan de Oro.

SM Prime also operated seven malls covering 1.27 million square meters in Xiamen, Jinjiang, Chengdu, Suzhou, Chongqing, Zibo and Tianjin in China.

In 2016, the property developer booked a 14% rise in recurring net income to P23.8 billion from P20.9 billion, following a 12% increase in its consolidated revenues to P79.8 billion from P71.5 billion.

Taking into account the P7.4- billion trading gain on marketable securities in 2015, however, SM Prime netted 16% lower in 2016.

“Over the projected period, profitability will remain strong. Revenues will continue to be driven by rental fees coming from shopping mall operations, as SMPH continues to expand, construct and open more SM malls,” PhilRatings noted.