D&L Industries, the country’s largest specialty foods ingredients, plastics and oleochemicals firm, has filed with the Securities and Exchange Commission its registration statement for a planned maiden bond offering of up to P5 billion.

In a disclosure to the Philippine Stock Exchange, the firm said it is planning to offer P3 billion worth of Peso-denominated fixed rate bonds with an oversubscription option of P2 billion.

Its preliminary prospectus showed that the bonds will consist of 3-year Series A bonds and 5-year Series B bonds which will be listed at the Philippine Dealing and Exchange Corporation.

D&L has tapped China Bank Capital Corporation to be the sole issue manager, lead underwriter and sole bookrunner.

The net proceeds are estimated to be approximately P2.96 billion to P4.94 billion, after deducting fees, commissions, and expenses relating to the issuance of the Bonds.

Proceeds of the Offer shall be used to finance remaining capital expenditures (P0.18 billion to P2.16 billion) and to repay bridge loans and interest drawn by the firm to fund capital expenditures (P2.78 billion to P4.94 billion).

D&L said capital expenditures related to its P8 billion Batangas expansion project has been ongoing since last year. Prior to the bond offer, the Company funded the project costs through bridge financing of short-term loans from its partner banks.

“With interest rates still remaining low, we believe it’s an opportune time to tap the debt market. Our maiden bond offering will be a useful financial exercise for the company and will allow flexibility for future opportunities we can potentially take advantage of,” said D&L President and CEO Alvin Lao.

Completion of the expansion is expected by the end of the year although the firm said it is still determining if there will be delays due to quarantine restrictions.

Once completed, the new plant will be instrumental to the company’s future growth, in line with plans to develop more high value-added coconut-based products and penetrate new international markets.

It will mainly cater to D&L’s growing export business in the food and oleochemicals segment. It will add the capability to manufacture downstream packaging, thus allowing the company to capture a bigger part of the production chain.

For instance, while the company primarily sells raw materials to customers in bulk, the new plants will allow it to “pack at source.” This means that D&L will have the ability to process the raw materials and package them closer to finished consumer-facing products.

This will enable D&L to move a step closer to its customers by providing customized solutions and simplifying their supply chain, which is of high importance given global logistical challenges and concerns.

As of end-December 2020, the company remained lightly-geared with net gearing at 17 percent and interest cover at 18 times. Average cost of debts, which were all short-term, stood at 3.53 percent.

Post bond offering, the company estimates its net gearing and interest cover to reach 42 percent and 11 times, respectively.