Megaworld Corp., the listed property development company of taipan Andrew Tan, plans to raise P15 billion fresh funds this year from the debt market, taking advantage of the low interest climate, a senior official said.
“We have already covered the capex [capital expenditures]this year and we do not really need to raise debt. But we will raise it because we don’t want to lose the opportunity… The rates are low,” said Jericho Go, Megaworld Senior Vice President.
“This is the best time to go to the debt market. You can fix your debt at a very low rate. So we will take advantage of that,” he told reporters on Friday. “If we will raise debt, we will just raise P15 billion.”
This will be the first time in years that Megaworld will raise funds from the debt market since the issuance of its $200-million corporate notes in 2011, which wil mature in 2018.
The upcoming debt notes issue will spice up the company’s debt-to-equity ratio of 0.26 as its current outstanding debt is “very low,” according to Go.
“We have a lot of legroom to raise debt. For us, we have very low debt that we can [tap], and interest rates are at its lows,” Go said.
The the P15-billion issue may be divided into four parts: Megaworld its three subsidiaries Global-Estate Resorts Inc. (GERI), Empire East Land Holdings Inc. and Suntrust Properties Inc. (SPI). It means a series of four P4-billion issuances for the property group this year.
Megaworld has covered its P65-billion capex for 2015, sourcing P41 billion from cash and cash receivables (less payables), P9 billion from expected recurring income this year, and the rest from the non-recurring and other incomes.
But Go said they would raise the P15 billion from corporate debt notes to spend on land acquisitions this year.
“Even if we don’t raise debt, we’re good. The capex for development is already covered, but the portion on land banking and land acquisition, that’s where [we will use the funds from debt],” Go said, citing 74 percent of the P65-billion spending will go to project developments while the other 26 percent will go to land banking initiatives.
From 2015 to 2019, Megaworld has programmed a P285.8-billion expansion plan to increase its portfolio across its residential, office, retail and hotels business segments, of which the initial P65 billion will be used for the launch of five new townships, development of projects and land banking this year.
The company’s notable townships include 18.5-hectare Eastwood City in Quezon City; 50-hectare McKinley Hill, 34.5-hectare McKinley West and 15.4-hectare Uptown Bonifacio.
Megaworld holds 100-percent stake in SPI, 74.96 percent in GERI, 82 percent in Empire East and some interests in 30 other subsidiaries.
Megaworld is a property arm of Tan’s holding firm Alliance Global Group Inc., which also owns and operates Emperador Inc., McDonalds local franchisee Golden Arches Development Corp. and Resorts World Manila operator Travellers International Hotel Group Inc.