D&L bond offer gets top credit rating
Alocal credit rating firm has assigned its highest score with a stable outlook to the planned P5-billion maiden bond issuance of chemical manufacturer D&l Industries Inc.
Philippine Rating Services corp. gave the company a credit rating of PRS aaa, the highest score with minimal credit risk. It said D&l’s capacity to meet its financial commitment on the obligation is “extremely strong.”
The ratings are based on the company’s strong market position in the industries that it is engaged in; diversification of products offered and markets served; and the bulk of D&l’s revenues are from innovation-driven, high margin specialty products, protecting the company from keen competition and ensuring continued demand for its products.
The ratings firm said D&l’s revenues have been fluctuating historically although net income was generally on an uptrend prior to the pandemic and margins were maintained within a narrow band while it practices conservative debt management and adequate cash flow generation.
“The observed fluctuations in revenues largely follow the nature of D&l’s business. The movements in commodity prices of raw materials caused by factors beyond the control of the company have affected revenue levels historically. The changes in commodity prices are passed on to customers following the company’s pass-through pricing mechanism, thereby subjecting its revenue base to corresponding fluctuations,” the local ratings firm said.
The company’s bond f loat consists of P3 billion in base offer and an oversubscription option of P2 billion.
The bonds may be offered in series a bonds due in 2024 and series b bonds due in 2026.
china Bank capital corp. has been mandated as its sole issue manager, lead underwriter and sole bookrunner
The bonds shall be issued in scripless form and in denominations of P50,000 each, as a minimum, and in integral multiples of P10,000 thereafter, and traded in denominations of P10,000 in the secondary market.
The bonds will be listed on the Philippine Dealing and Exchange corp.
according to its initial schedule, rate setting is on august 18, public offer period is from august 24 to 31, and listing date is on September 7.
Proceeds of the bonds will be used to pay for the loans it used for its new facility in Batangas.
“capital expenditures related to the Batangas expansion project has been ongoing since the past year. Prior to the offer, the company funded the project costs through bridge financing of short term loans from its partner banks. D&l intends to repay these bridge loans from the proceeds of the offer,” the company said.
“It’s more conservative to have some long-term debt considering we have some long-term assets that we have to finance like the construction in Batangas plant. So that’s why issuing the bond seems to make more sense [than doing a preferred share sale or private placement],” alvin lao, the company’s president and ceo, said.