D&L Industries’ maiden bond offering garnered strong support from fixed income investors as total bids received amounted to P13.8 billion, which is equivalent to 4.6 times the base offer size of P3 billion.
In a disclosure to the Philippine Stock Exchange, the firm said that, light of the robust demand, D&L’s management expects the exercise of the oversubscription option of up to P2 billion.
Upon full exercise of that option, the issue size will increase to P5 billion, composed of a P3 billion bond with a tenor of 3 years (Series A Bonds) and a P2 billion bond with a tenor of 5 years (Series B Bonds).
Interest rates were set at the tight end of the marketing range given the favorable response from investors.
The Series A Bonds will carry a coupon rate of 2.7885 percent p.a., which is equivalent to the average 3-year PHP BVAL rate from August 24 to 26, 2021 plus a 50 bps spread.
The Series B Bonds will carry a coupon rate of 3.5962 percent p.a., which is equivalent to the average 5-year PHP BVAL rate from August 24 to 26, 2021 plus a 60 bps spread. Interest payments will be made quarterly in arrears.
“We are overwhelmed with the strong support the fixed income community has shown us in our debut bond issuance. This has allowed us to price our bonds at among the lowest rates in Philippine corporate bond history,” said D&L President & CEO Alvin Lao.
Philippine Rating Services Corporation (Philratings) rated the bonds PRS Aaa with Stable Outlook, the highest rating assigned by the agency. D&L tapped China Bank Capital Corporation as the sole issue manager, lead underwriter, and sole bookrunner of the milestone bond offer.
The proceeds from the bond issuance will be used primarily to finance the company’s expansion plans in Batangas and the corresponding working capital requirements.
“This maiden offering will be a useful financial exercise for the company and will allow us to fully fund our Batangas expansion, which will be the next leg of growth for the company. We are looking forward to May 2022 when commercial operations finally start,” said Lao.
Construction of the said plant started in late 2018 and commercial operations are expected to partially commence in May 2022. Total estimated capex for the said facility amounts to approximately P8 billion, with around P3.5 billion remaining to be spent.
D&L Industries’ strong recovery continued in the second quarter of 2021, with earnings growing 134 percent year-on-year to P671 million. This brings earnings for the first half of the year to P1.4 billion, up 74 percent year-on-year.
All segments posted significant recovery YoY with consolidated income already at pre-COVID levels. Assuming that the income for the first half holds steady for the remainder of the year, D&L is targeting to at least reach its 2019 income level.
As of end-June 2021, the company remained lightly-geared with net gearing at 25 percent and interest cover at 29 times. Average cost of debt, which were all short-term, stood at 2.77 percent.
Post bond offering, the company estimates its net gearing and interest cover to reach 30 percent and 18 times, respectively, for the period-ended December 2021.