More firms to issue dollar-denominated securities

APPETITE for dollar-denominated securities will get a boost as more companies set their sights overseas to satisfy their thirst for growth, according to BDO Capital & Investment Corp., the issue manager of the first issuance under the new asset class.

Demand from institutional investors and high net worth individuals have fully covered Del Monte Pacific, Ltd.’s up to $250-million dollar-denominated securities offering at pricing date last March 20, BDO Capital & Investment Corp. President Eduardo V. Francisco said during the global fruit canning giant’s investor’s briefing on Wednesday.

“There are no direct inquiries (from companies), but they are looking at it. They’ll be beneficiaries of the hard work that has been done to pave the way for this issuance,” Gabriel U. Lim, senior vice- president at BDO Capital, said in an interview.

As more companies engage in offshore merger and acquisition (M&A) deals, this will only drive more issuance of dollar-denominated securities, Mr. Francisco said.

Del Monte is using proceeds from the offer to refinance a $ 350- million bridge loan with BDO Unibank, Inc. that partially funded the $ 1.68- billion acquisition of Del Monte Foods, Inc. (DMFI) in 2013.

“At that time, there were very little Filipino companies going abroad to buy. Since then, you’ve seen Andrew Tan buy different brands abroad and others, but it has been a rarity,” Mr. Francisco said, referring to the tycoon who chairs conglomerate Alliance Global Group, Inc.

That DMFI deal kicked off a number of big- ticket offshore acquisition for homegrown firms. These include Universal Robina Corp.’s takeover of New Zealand snack food giant Griffin’s, Emperador, Inc.’s purchase of Scottish whisky maker Whyte & Mackay and Spanish brandy Fundador, and Monde Nissin Corp.’s acquisition of United Kingdom-based meat substitute producer Quorn Foods.

With opportunities presented by the integration of the Southeast Asian economies and the dearth of big- ticket projects at home, Philippine companies awash with cash are encouraged to go out and shop elsewhere, driving M& A deals despite the weakness in the peso.

The government is leaning towards official development assistance (ODA) in addition to the public-private partnership (PPP) scheme to fund the “golden age of infrastructure,” meaning less investment opportunities for the private sector, Mr. Francisco said.

“Also many companies [ are] not willing to sell, or if they are, then asking price is too high,” Mr. Francisco said.

The dollar-denominated facility will allow listed companies to raise fresh capital in US dollars to meet their dollar requirements, thereby removing foreign exchange risks. It also provides investors with dollar holdings an alternative investment vehicle.

“Both Del Monte and BDO wanted to do this instrument because there’s about $ 32 billion in FCDU ( foreign currency deposit unit) accounts in Philippine banks. We know there’s a lot of dollar liquidity out there,” Mr. Lim said.

“We also see that the Philippine government and corporates issue dollar-denominated bonds offshore. We know for a fact there are a lot of Filipino investors who end up buying those bonds,” he added.

Six more trading participants are lining up to be added to the list of eligible brokers. So far, only Armstrong Securities, Inc. and BDO Securities Corp. have been cleared by the Exchange as eligible brokers.

“That validated our analysis: there is such a market out here that can support issues like this,” Mr. Lim.