Manila, Philippines
geri@investmoney.com.ph

Lend Money to SMC Global Power Through Bonds 6.8% p.a.

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How would you like to lend money to a corporate giant like San Miguel and its subsidiaries? Well, here’s another chance for you. Listed conglomerate San Miguel Corp (PSE: SMC) disclosed today that its power unit, SMC Global Power, has received approval from the SEC on their corporate bonds offering.

P60-billion

SMC Global Power aims to raise P60-billion from this bond offering but for this first batch offered, total expected investments amount to P25-billion with extra P5-billion in case of over-subscription / strong demand from investors. They will use the funds to refinance existing loans, convert its US dollar loans to peso, as well as expand its assets in the power business.

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What are Bonds?

Basically, bonds are corporate borrowings from the public / investors that has an agreed interest rate per annum and maturity. If you’re the type that prefers to invest in time deposits, then this may be a good alternative for you since it carries less risk compared to stocks, and your money is just there until maturity. The only difference is that bonds are not PDIC-guaranteed (unlike time deposits) and the interest income is paid out quarterly, and not reinvested.

For the common Juan, this is like you lending money to big businesses (together with other retail investors of course).

Bonds also work pretty much like preferred shares, except that bonds are listed elsewhere (and not in the stock exchange), and the tax on interest income for bonds is 20% while preferred shares income tax is 10%.

The risk here is if the company is unable to pay its obligations, for example if it goes bankrupt, then you line up with other creditors for a chance to get paid. What are the chances for SMC? Click here to learn more about corporate bonds in the Philippines.

SMC Global Power’s sister company, Petron, also disclosed recently that it shall be issuing preferred shares soon. The San Miguel group is actually among those companies who are very much active in tapping the debt markets to borrow more funds from the public.

In 2016, we availed of bonds from SMC Global Power, but interest rate back then was lower at 4.35% for a 5-year term. Offerings this time around have higher yields.

Bonds Terms

The offerings are named as series H, I, J (pretty much like the SMC preferred shares 2G, 2H, 2I offered in 2016). Offer period is from April 1 to 12. Or until supplies last. Listing date is April 24.

  • Series H
    • Maturity: 2022 (3 years)
    • 6.8350% p.a.
  • Series I
    • Maturity: 2024 (5 years)
    • 7.1783% p.a.
  • Series J
    • Maturity: 2026 (7 years)
    • 7.6000%

Where to Avail?

SMC Global Power tapped the following for this bond offering. Inquire with your preferred institution below:

  • BDO Capital
  • BPI Capital
  • Chinabank Capital
  • PNB Capital
  • SB Capital
  •  

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*Images are from the company website.

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 PSE: SMC

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