SMC Global to issue 115 B worth of bonds, gets top rating
SMC Global Power Holdings Corporation (SMC Global Power), a subsidiary of San Miguel Corporation, is planning to raise 115 billion through the issuance of Fixed Rate Bonds.
Philippine Rating Services Corporation (PhilRatings) has assigned its highest Issue Credit Rating of PRS Aaa to the proposed bonds. Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
In arriving at the rating, PhilRatings identified SMC Global Power’s key strengths which include good market standing despite its relatively short operating history.
It also noted the strong parent company support and synergies derived from the San Miguel Group of Companies (SMC Group), with a team of experienced professionals managing the company; and its sound cash generating ability from operations.
PhilRatings said it also considered the impact of foreign exchange movements on the Company’s profitability and the outstanding legal issues that may affect the results of operations.
Part of the proceeds from the issuance, which will have tenors of 5, 7 and 10 years, will be used to refinance short-term loan provided by BDO Unibank which were in turn used to redeem $300-million notes due this year.
The rest will be used for general corporate purposes such as overhead expenses, taxes and other operations-related expenses or payment of related transaction fees.
SMC Global Power, together with its subsidiaries, is one of the leading and largest power companies in the Philippines, with a combined capacity of 2,903 megawatts as of December 31, 2015.
Based on the installed generating capacities from the Energy Regulatory Commission, SMC Global Power accounted for 22.2 percent of the Luzon grid and 16.5 percent of the total installed capacity of the national grid as of June 30, 2015.
In addition, SMC Global Power, through a subsidiary, is the concessionaire for the operation and maintenance of Albay Electric Cooperative, Inc., the distributor of electricity in the province of Albay. The Company likewise holds a retail electricity supplier license through San Miguel Electric Corp.
The firm’s cash flows from operations amounted to 125.3 billion last year, adequate to support maturing obligations, while total cash flows used in investing and financing activities amounted to 141.7 billion.
With profitability expected to significantly improve, cash will mostly be internally generated from operations. In addition, cash from the sale of power and electricity has been and is expected to continue to be the main source of liquidity for the Company.