SM Prime to raise up to P30 B from bond issuance

SM Prime Holdings Inc., one of the leading integrated property developer in Southeast Asia, is planning to issue up to P30 billion in bond from the fourth tranche of its P100 billion debt securities program.

Philippine Rating Services Corporation (PhilRatings) has assigned the highest issue credit rating of PRS Aaa to SM Prime’s proposed bond issue of P15.0 billion, with an oversubscription option of up to P15.0 billion. The rating has a Stable Outlook.

The ratings for SM Prime’s outstanding bond issuances amounting to P99.63 billion have also been maintained at PRS Aaa. The assigned Outlook for these is Stable as well.

Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

A Stable Outlook, on the other hand, indicates that the rating is likely to be maintained or to remain unchanged in the next 12 months.

PhilRatings said “The assigned issue ratings take into consideration SMPH’s healthy liquidity; sound capitalization; well-experienced shareholders and management; and strong brand equity which is expected to provide a solid take off point for growth as the domestic economy further opens.”

Despite the volatility in mall traffic due to quarantine restrictions, SM Prime’s cash flow remained healthy as operations continued to be the main source of cash.

“Cash was largely used for capital expenditures (capex), indicating continued expansion amid a still challenging operating environment,” the ratings agency noted.

It added that, “Moving forward, the increase in operating cash will be supported by higher income. With the foregoing, funding for capex will be mostly sourced from internal funds. Future capex spend will be largely for expansion of SMPH’s property portfolios.” Debt to equity (DE) ratio has remained relatively stable, indicating that leverage has been well-managed despite the increase in borrowings.

DE ratio stood at 0.9x as of yearend 2021, unchanged compared to the yearend 2020 ratio. Forecast DE ratio will improve further, with bottom line growth supporting earnings retention.

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The article was originally published in Manila Bulletin and written by James A. Loyola.