AYALA CORP. and its property arm, Ayala Land Inc., two of the country’s most active corporate issuers, have blazed the trail for trading of corporate debt in the country’s fixed income bourse.
The Ayala-led firms will be listing their fixed rate bonds in the Philippine Dealing and Exchange Corp. (PDEx) this week: Ayala Land with a fresh P4-billion bond issue today and Ayala Corp. with a P6-billion outstanding debt issue on Friday.
The move, a first for the Philippine capital market, is expected to boost the nascent domestic corporate debt market. Corporate issues in the country account for only less than 2% of total issues in the local debt market, which has been largely dominated by government-issued bonds, data from PDEx showed.
PDEx is mainly a trading platform for government securities, churning a volume that reached the P1-trillion mark as of July 14 this year — an indication of buoyant bond market activity despite rising interest rates.
"Corporate markets will not develop if benchmark issues are not traded. Now, we’re integrating the corporate issues into the PDS," said Vicente B. Castillo, president and chief executive officer of the Philippine Dealing System Holdings Corp. & Subsidiaries (PDS Group), the head unit of PDEx.
The Ayala bonds are rated Aaa by local credit ratings firm Philippine Rating Services Corp. (PhilRatings), the highest debt score possible in its rating scale.
Ayala Land’s debt notes, which fetched a coupon rate of 8.75%, were issued last August 13 and will mature in 2013. Ayala Corp.’s corporate securities, meanwhile, are old peso-denominated debt notes issued last November 21 and fall due on 2012. These five year bonds carry a coupon rate of 6.825%.
Listing in the PDEx mean the trades for these corporate bonds will be automatically transmitted to the so-called PDS Gateway, where the buying and selling parties and their intermediaries authorize the trade for settlement. This veers away from the common practice where trades were limited to the issuers’ selling agents and the investor.
The listings enable the issuers to access a broader market, including qualified and retail investors. For trading participants, mostly banks, it means a more diversified menu of available trading instruments and flexibility to convert the instrument into cash.
Investors similarly benefit as the listing allows better price discovery and transparency, as well as greater liquidity and portfolio diversification.
"Under the listings, issuers are required to give timely information to the investing public through the disclosure mechanism set by PDEx," PDEx said in a statement. "This is envisioned to give investors an opportunity to evaluate their investments and make informed decisions on whether to sell, buy or continue to hold them."
Other corporate issuers are expected to follow suit, industry officials said.
"There are plans for a couple of issuances until the end of the year," PDEx president and chief executive officer Cesar B. Crisol told BusinessWorld.
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