JFC to sell shares, buy back dollar bonds to manage debt

Local fast-food giant Jollibee Foods corp. (JFC) on Wednesday said it will sell some P12 billion in preferred shares and buy back $250 million of its perpetual bonds through cash tender offer as part of its plan to restructure its debts this year.

In its disclosure, Jollibee said its board has approved the two measures. The preferred share offering, the company’s first, would need shareholders’ and regulator’s approval.

“JFC’S objective in this plan is to restructure its financial obligations in order to strengthen its balance sheet, spread the maturity of its financial obligations and reduce its foreign exchange risks. This is also part of its action steps to reduce its debt and financing cost as its businesses in different parts of the world

recover from the severe impact of the pandemic,” the company said in its disclosure.

As of the first quarter, sales from its businesses outside of the Philippines now account for 41 percent of its global systemwide sales and were reaching pre-pandemic levels, it said.

For the three months of the year, the company posted P153 million in net income, a turnaround but still not enough to recoup the P1.67-billion loss it incurred last year.

Systemwide sales, meanwhile, were still down by 13 percent to P47.78 billion from the previous year’s P55.15 billion.

Philippine sales fell by more than a fifth but overseas sales rose 1 percent, the company said.

Jollibee said it will apply for shelf registration of up to P20 billion to issue peso-denominated perpetual preferred shares. Some P8 billion equivalent to 8 million preferred shares will be sold and P4 billion or 4 million preferred shares, will serve as its oversubscription option.

The initial issuance shall be issued in up to two sub-series and may have step up dividend rates if these are not redeemed within 3 years or 5 years, the company said.

These preferred shares will come from the reclassification of existing authorized and unissued common shares and thus will not expand the total number of authorized shares in its equity base.

The preferred share issuance will also not affect the current cash dividend policy and its implementation as the company’s total financial obligations will hardly change since the issuance of preferred shares will be mostly offset by a reduction in other financial obligations such as the reduction in the amount of the US dollar bonds, it said.

Jollibee declares 33 percent of net income attributable to common equity holders of the parent company as its dividends.

In addition to the buy-back of perpetual dollar bonds, the company plans to reduce its other financial obligations in the form of bank loans within the year.

In January last year the company through its wholly owned subsidiary JWPL (Singapore) issued $600 million in perpetual bonds maturing in 2025 and in June 2020 another $300 million in senior debt securities maturing in 2026 and $300 million in senior debt securities maturing in 2030.

Some $400 million from the perpetual bond offer was used to pay off short-term loans used mostly for the acquisition of Coffee Bean and Tea Leaf in September 2019 while those from senior debt securities served as contingency measure against unforeseen adverse impact of a prolonged pandemic.