D&L Industries has secured approval from the Securities and Exchange Commission (SEC) for its maiden bond offering.
The company plans to issue a base offer of up to P3 billion with an oversubscription option of up to P2 billion with a tenor of 3 and/or 5 years.
The offer period will run from September 1 to September 6, 2021 while issue and settlement date will be on September 10, 2021.
Philratings rated the bonds PRS Aaa with Stable Outlook, the highest rating assigned by the agency. D&L tapped Chinabank Capital as the sole issue manager, lead underwriter, and sole bookrunner.
The proceeds from the bond issuance will primarily be used to finance the company’s expansion plans in Batangas and the corresponding working capital requirements.
Construction started in late 2018 and commercial operations are expected to partially commence in May 2022. Total estimated capex for the said facility amounts to P8 billion. Remaining capex to be spent stands at about P3.5 billion.
Once completed, the new plant will be instrumental to the company’s future growth, in line with plans to develop more high value-added coconut-based products and penetrate new international markets.
It will mainly cater to D&L’s growing export business in the food and oleochemicals segment. It will add the capability to manufacture downstream packaging, thus allowing the company to capture a bigger part of the production chain.
For instance, while the company primarily sells raw materials to customers in bulk, the new plants will allow it to “pack at source”. This means that D&L will have the ability to process the raw materials and package them closer to finished consumer-facing products.
This will enable D&L to move a step closer to its customers by providing customized solutions and simplifying their supply chain, which is of high importance given global logistical challenges and concerns.
“We believe that it’s an opportune time to tap the debt market with interest rates still remaining low. This maiden bond offering will be a useful financial exercise for the company and will allow flexibility for future opportunities we can potentially take advantage of. We are delighted to share that our bond offering was rated PRS Aaa with Stable Outlook by Philratings, which, in our view, validates the strong prospects of our business,” remarked President and CEO Alvin Lao.
D&L Industries’ strong recovery continued in the second quarter of 2021 (2Q21), with earnings growing +134% year-on-year to P671 million. This brings earnings for the first half of the year (1H21) to P1,395 million, +74% YoY. All segments posted significant recovery YoY with consolidated income already at pre-COVID level. Assuming that the income for the first half holds steady for the remainder of the year, D&L is targeting to at least reach its 2019 income level.
As of end-June 2021, the company remained lightly-geared with net gearing at 25% and interest cover at 29x. Average cost of debts, which were all short-term, stood at 2.77%. Post bond offering, the company estimates its net gearing and interest cover to reach 30% and 18x, respectively, for the period-ended December 2021.