Jollibee Foods Corporation is re-evaluating its planned P8 billion preferred share offering to downsize it or opt for more flexible bank loans in light of its stronger cash flow and the expected interest rate cuts in the coming months.

In an interview, Jollibee Chief Finance Officer Richard Shin noted that the proceeds from the preferred share offering was intended to finance 47 percent of the firm’s capital expenditures for its Philippine businesses. 

He noted that, “what we've seen recently, it's a good surprise, and it's a good problem to have, but our growth in the Philippines is faster than our planned growth. Which is to say, it's a cash business, so we don't know how much really we need in terms of preferred shares because our business is actually growing much faster.”

“So, we're going to reevaluate and we're going to consider if we need to do the preferred, if we do it if we need the 5 million cap that's been announced. 

“We're taking a look at this, again, understanding that the rates haven't come down yet. And that's important because to lock into a fixed rate, whether it's a coupon or whether it's interest, at the time of a potential rate cut, that's probably not the right way,” Shin explained. 

He added that, “we're looking at other instruments that's more variable in order to take advantage of lower interest rates that we know are coming…

“Now the great thing is, we have options. And we have partners who have been with us for decades. So we have many banks and other institutions that are willing to finance us. So we're looking at all the options at the moment,” Shin said.

Jollibee disclosed last March that its board of directors had approved the plan to offer and issue five million preferred shares with an oversubscription option of up to three million preferred shares at P1,000 apiece.

“These will be cumulative, nonvoting, nonparticipating, nonconvertible, redeemable, peso-denominated perpetual preferred shares,” it said adding that offering is meant to help it “maintain strong capital structure, robust leverage position, and optimize liquidity by managing maturities of financial obligations.”

“A portion of the net proceeds from the offering will be used to refinance financial obligations including JFC’s callable Series A Preferred Shares, which is due in October 2024 and for other general business purposes,” Jollibee said.

This will be the second tranche of JFC’s 20 million preferred shares shelf registration approved by the SEC in September 2021.

“The second tranche preferred shares will come from the reclassification of the existing authorized and unissued common shares of JFC, thus not expanding the total number of authorized shares in its equity base,” the firm said.