SMC sets 1700-billion capex in 5 years Espenilla faces his first big policy test as BSP chief Local stocks bounce back on solid US market recovery

iversified conglomerate San Miguel Corporation (SMC) is planning to allot R700 billion for capital expenditures (capex) over the next five years to fund the expansion of both its core and new businesses.

This was revealed by SMC Chief Finance Officer Ferdinand Constantino during the institutional investors’ briefing for the firm’s R30-billion fixed-rate bond offering.

In an interview at the sidelines, SMC Senior Vice President and Head of Treasury Sergio Edeza said the biggest capex allotments will be for the firm’s food (San Miguel Pure Foods Co.) and infrastructure businesses (tollroads, airports).

Also getting substantial shares will be SMC’s investments in the power business through SMC Global Power Holdings Corporation as well as San Miguel Brewery, Inc. which is putting up breweries and bottling facilities in Southern Luzon and Mindanao with a capacity of two million hectoliters each.

However, Constantino noted that this does not yet include the proposed international airport in Bulacan for which the firm has submitted an unsolicited bid. This project may cost another R700 billion on its own.

“As usual, the capex will be funded by 70 percent debt and 30 percent equity,” said Edeza adding that they will be tapping all available funding options such as bank loans, preferred share issuance, and cash from operations.

San Miguel may also opt to offer more bonds although Edeza noted that they will already have used up the R60 billion that was shelf registered with the Securities and Exchange Commission once they conclude the ongoing bond sale.

The bonds, which represent the third tranche of the company’s R60-billion bond shelf registration approved by the SEC, are comprised of 5-year Series E Bonds due 2023, 7-year Series F Bonds due 2025 and 10-year Series G Bonds due 2028.

Based on an indicative guidance issued during an investors’ briefing yesterday, the five-year bonds will be priced to yield about 5.6 percent a year, the seven-year bonds, about 6 percent and the 10-year bonds, about 6.4 percent.

Proceeds from the bond offering will be used to refinance existing US dollar denominated obligations and for investment in existing businesses, including SMC Global Power, San Miguel Holdings Corporation and San Miguel Properties, Inc.

SMC has named BDO Capital and Investments Corp., BPI Capital Corporation, China Bank Capital Corporation, First Metro Investments Corporation, ING Bank, SB Capital Investment Corporation and Standard Chartered Bank as the joint underwriters and book runners for the offering.