JG Summit has two outstanding bonds, one due in 2002 and the other in 2004. However, both are essentially very illiquid, given that the company has actively been buying the bonds back from the market. Indeed, with the firm’s sales of stakes in PCI Bank and Apo Cement, it gained Ps10 billion of cash which it used to lower its gearing to 39% from 98%.
The new issue will be for three years. At 365bp over, it is over 100bp wide of Philippines sovereign loan spreads of around 261bp over Libor for the same maturity. While unrated, ING Barings wrote in a December credit research report that it reckoned the conglomerate was a BB equivalent.
JG Summit is a highly diversified company that owns 79% of food company Universal Robina, 53% of mobile phone company Digitel and 84% of Robinson Land. It gets 49% of its revenues from foods, 9% from real estate and hotels, 14% from petrochemicals, and 13% from telecoms – the rest coming from a variety of businesses including textiles.
ING Barings is well and truly the house bank to the Gokongwei-controlled conglomerate, having done its IPO in 1993, and launched its eurobonds in 1996 and 1997. It also advised the company on its disposals of PCI Bank and Apo Cement.
Given its solid financial position, it isn’t clear whether the new FRN is merely an attempt to optimize its balance sheet or whether it is looking at acquisitions. If the latter, you can bet ING Barings will be advising the conglomerate.
