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SM Prime borrows P5B for mall expansion plans

Posted on March 24, 2011 10:16:44 PM [ BusinessWorld Online ]
SM PRIME Holdings, Inc., the country’s largest mall developer, has raised P5 billion from five-year floating rate notes to bankroll operations and expansion plans, the company told the local bourse yesterday.
This follows the trend of listed firms securing fresh funds from lenders amid favorable interest rates, an analyst said.
Bank of the Philippine Islands, Metropolitan Bank & Trust Co. and Allied Bank subscribed to the notes arranged by First Metro Investment Corp., the investment banking arm of the Metrobank group.
“Proceeds of the issue will be used to fund ongoing capital expenditures and other general corporate requirements,” SM Prime said.
The mall developer and operator said it plans to open a total of three new malls: SM City Masinag in Antipolo City, SM City San Fernando in Pampanga and SM City Olongapo in Zambales.
Expansion plans are meanwhile under way in existing malls SM City Davao in Southern Mindanao and SM City DasmariƱas in Cavite.
By the end of the year, SM Prime will have 43 malls nationwide with a gross floor area of 5.2 million square meters.
“Including the SM malls in China, the company’s gross floor area will reach 5.9 million square meters,” it added.
SM Prime has a mall in Xiamen and Jinjiang in Southern China, and Chengdu in Central China.
“The five-year floating rate note is SM Prime’s first capital market issuance for 2011,” SM Prime President Hans T. Sy said in the same statement.
“The very positive response of financial institutions to the company’s issuance manifests the market’s confidence in SM Prime’s creditworthiness, stability, and growth potential,” Mr. Sy added.
The announcement comes on the heels of earlier reports from other listed companies similarly raising funds through corporate notes.
In January, property giant Ayala Land, Inc. raised P10 billion from the sale of 10- and 15-year corporate notes, to finance capital spending for this year and extend debt maturity.
This was the largest fund-raising scheme so far of Ayala Land.
Pangilinan-led Philippine Long Distance Telephone Co., for its part, announced on Monday that it generated P5 billion from the sale of fixed-rate notes.
The proceeds will reportedly fund capital expenditure and will also be used to refinance debt.
SM Investments Corp., the holding firm of the Henry Sy-led mall and banking conglomerate, meanwhile, said last month it wants to sell as much as P7 billion worth of corporate notes under a private placement to refinance debts this year.
“Interest rates are still low and that is a conducive environment for issuing notes,” Astro C. del Castillo, managing director of brokerage firm First Grade Holdings, Inc., said in a telephone interview yesterday.
“There continues to be an appetite for it,” Mr. del Castillo said.
The overnight borrowing rate is currently pegged at just 4.25% even after the Bangko Sentral ng Pilipinas monetary board hiked interest rates by 25 basis points for the first time since mid-2009.
The record low had been 4%.
Mr. del Castillo said capital raising is still attractive given market liquidity.
SM Prime’s consolidated net income jumped by 12% to P7.9 billion last year amid a strong economy and high level of consumption.
Shares in SM Prime fell by four centavos to close at P10.96 each yesterday. -- Neil Jerome C. Morales
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