The Philippines: San Miguel Food and Beverage to raise P15 billion through sale of fixed-rate bonds
San Miguel Food and Beverage Inc. plans to raise P15 billion through the sale of fixed-rate bonds, the Philippine Star reported on December 5.
Proceeds from the proposed issuance will largely be used for the redemption of the P15 billion Series 2 preferred shares of SMFB in March 2020.
The offer received the top rating of PRS Aaa from local credit watcher Philippine Rating Services Corp. Obligations rates PRS Aaa are of the highest quality with minimal credit risk. The issuer’s capacity to meet its financial commitment on the obligation is extremely strong.
It was also assigned a stable outlook, which means the rating is likely to be maintained or to remain unchanged in the next 12 months.
In assigning the rating, PhilRatings took into account SMFB’s strong brand equity and leading market position, realized synergies as part of the San Miguel Group, the continued positive outlook for the economy, the company’s conservative financial position and its strong profitability performance and healthy cash flow generation.
In 2018, conglomerate San Miguel Corp. underwent an internal restructuring to consolidate its food and beverage business under SMFB. Folded into SMFB are San Miguel Pure Foods Co., San Miguel Brewery and Ginebra San Miguel.
At present, SMFB is considered as the country’s leading food and beverage company with three primary operating divisions, namely beer, spirits, and food.
Among the major food subsidiaries are Magnolia Inc. and Purefoods-Hormel Co. Inc.
SMFB’s parent company SMC is one of the largest and most diversified conglomerates in the Philippines. The size and scale of the broader San Miguel Group likewise provide SMFB with significant leverage and bargaining power with suppliers.
Furthermore, the consolidation of SMC’s food and beverage business under SMFB resulted in economies of scale in infrastructure and unlocked greater shareholder value by creating a sizeable consumer vertical market under one company.
Over the years, SMFB has been able to exhibit solid profit performance and healthy cash flow generation. Total Revenues grew at a compounded annual growth rate of 11.7 percent from 2015 to 2018.
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