SMC seeks bondholder consent to use NAIA shares as loan collateral

By Alexandria Grace C. Magno

SAN MIGUEL Corporation (SMC) has initiated a “consent solicitation” to its bondholders to amend the terms of several outstanding bonds, a move aimed at facilitating project financing for its subsidiary, New NAIA Infra Corp., which is undertaking the rehabilitation and operation of the Ninoy Aquino International Airport (NAIA).

The company is asking for permission to use shares it owns in its NAIA subsidiary as collateral for a loan, and to adjust certain definitions in its bond agreements to allow for this.

In a disclosure on Monday, the company requested bondholders’ consent to waive specific negative covenants and approve amendments to trust agreements, which would enable its subsidiary, San Miguel Holdings Corp., to grant security interests related to the project financing.

The proposed changes included increasing the ownership threshold in the definition of “material subsidiary” from 25% to 30%, and expanding the “permitted liens” definition to include exceptions for project financing liens.

SMC aims to align the bond terms with common project finance structures, allowing the company and its material subsidiaries to support infrastructure projects while ensuring the debt remains non-recourse to them.

The company said that these changes are essential to sustain its ongoing growth and involvement in large-scale and greenfield projects, including joint ventures and minority ownership.

Meanwhile, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message that bondholders can look at the consent solicitation in two ways.

“If bondholders agree to the solicitation, they’re basically helping SMC raise money easier for its projects, which could make the company stronger and better able to pay its debts down the line. That’s the upside,” he said.

“On the flip side, it also means bondholders give up some of their safety nets, since SMC can use the airport shares as collateral,” he said.

Mr. Limlingan added that SMC’s strong portfolio and relatively healthy cash flow should ease any concerns.

The consent solicitation involves several bond issues, including the 5.7613% Series C bonds maturing in 2027; 7.1250% Series G bonds due in 2028; 7.4650% Series I bonds due in 2027; 5.2704% Series J bonds due in 2027; 5.8434% Series K bonds due in 2029; 7.4458% Series L bonds maturing in 2028; 7.8467% Series M bonds due in 2029; 8.4890% Series N bonds due in 2032; 7.2584% Series O bonds maturing in 2033; and 7.7197% Series P bonds due in 2034.

SMC’s consent solicitation period is scheduled from noon of Sept. 8 to noon of Oct. 8, with the results to be published on the Philippine Dealing & Exchange Corp. (PDEx).

“Only holders of the Fixed Rate Bonds on Record Date may participate in the consent solicitation,” the company noted.

SMC shares rose by 1.13% at P58 apiece on Tuesday.