Private firms turn to bond market for funds

Private companies in the Philippines continue to turn to the domestic bond market to raise funds for their expansion projects, the Securities and Exchange Commission (SEC) reported over the weekend.

Private companies registered a total of P137 billion in fixed rate and deferred coupon paying bonds from January to July 2016.

Of the amount, P121 billion was registered under the shelf registration system of the SEC.

Under shelf registration, issuers have the option to register and sell issues under the same regulatory documents securities, which they do not intend to sell right away. As such, securities to be issued in tranches may be registered for an offering to be made on a continuous or delayed basis for a period not exceeding three years.

This means issuers can time their capital raising activities as they are needed or when market conditions favor them.

This is provided for under the Implementing Rules and Regulations of the Securities Regulation Code which took effect in November 2015.

Out of the total P137 billion registered corporate bonds, a total of P52 billion had been issued so far, and P36 billion worth of corporate bonds were issued under shelf registration.

SEC attributed the hefty increase in corporate bond issuance by conglomerates to the enhanced shelf registration program under the 2015 Securities Regulation Code.

The SEC also provided flexibility in the payment of registration fees. Fees are now payable per tranche of issuance and proportional to the issued value.

The SEC has been active in promoting efficiency-related measures such as the shelf registration program, seen as a step in improving the quality of business regulation in line with the Duterte administration’s 10-point socioeconomic agenda to increase business competitiveness.

The issuers that received the approval of the SEC were SM Prime Holdings for a shelf registration of P50 billion for its fixed rate bonds, Ayala Corp. for a shelf registration of P20 billion in fixed rate bonds, SMC Global Power Holdings Corp. for P15 billion in fixed rate bonds, DMCI Project Developers for a shelf registration of P1 billion deferred coupon paying Home Saver Bonds, Ayala Land Inc. for shelf registration of P50 billion and SL Agritech Corp. for P1 billion short term commercial paper.