Perpetual Bonds is the New Deal for San Miguel Corporation

Perpetual bonds are generally issued by governments or institutions owned by governments. There are times when businesses with an impressive business background that are financially healthy have been able to sell perpetual bonds.

From the viewpoint of the issuer, the main advantage is that the issuer does not have to pay for the theory. For the issuer, they just have to pay the interest and interest payout saves taxes. Moreover, as the concept is never paid out the balance sheet does not regard it as debt. Thus, institutions issuing perpetual bonds have a two-fold advantage.

In view of this, The San Miguel Corp. power subsidiary, SMC Global Power Holdings Corporation is focusing the issuance of another round of perpetual securities worth at least $300 million.

In order to issue additional undated senior perpetual capital securities, the firm has obtained board approval. SMC Global stated that the corporation’s net proceeds will be used and applied mainly for the repurchase, refinancing and/or redemption of existing undated subordinated equity securities, for investments in liquefied natural gas  facilities and related properties or for general corporate purposes.

The business is in advanced phases of executing the term sheet of the binding terminal usage agreement for the proposed LNG terminal in Batangas, with AG&P to provide facilities for receipt, storage and regasification.

Another things is the “Priority status” for the Ilijan LNG terminal has been negotiated for all AG&P LNG project programs. In fact, The additional securities are combined and form a single series of senior perpetual capital securities issued last October with their current $400 million undated securities.

As joint lead managers, SMC Global engaged Credit Suisse (Hong Kong) Ltd., DBS Bank Ltd., Standard Chartered Bank and UBS AG Singapore Branch, DB Trustees (Hong Kong) Ltd. for the issuance.

Somehow it is interesting since government and financially-strong institutions offer perpetual bonds and they are low risk investments. The only danger is fluctuating interest rates.