Philippines Capital Markets Deal: SMIC’s US$500m 5.375% five-year bond
Strong return
SM Investments Corporation came back to the US dollar bond market with a bang in 2024 after a 10-year absence. Following a three-year dearth of benchmark-size corporate deals from the Philippines, SMIC reopened the market with a US$500m 5.375% five-year senior bond that stood out as the country’s capital markets deal of the year.
The property-to-infrastructure conglomerate printed its bond at a 5.466% yield or 135bp over US Treasuries, 35bp tighter than price guidance.
It was the largest five-year deal by a Philippine corporate in 2024 and achieved notably tight pricing for an unrated name.
Corporate deals out of the Philippines in 2024 had been few and far between until SMIC came along – up to that point, there had been one cancelled deal and one downsized trade – so investors warmly welcomed the opportunity to gain exposure to a relatively rare credit.
Following a non-deal roadshow earlier in the year, the transaction was marketed on a spread basis, unusual for an unrated name. This was a particularly wise move, as the deal was priced during a week of high volatility in yields.
It soon became clear investors were comfortable treating the borrower as investment grade, despite the lack of a rating. The books grew to US$1bn by midday in Asia and peaked at US$2.35bn.
The strong oversubscription prompted the issuer to upsize from a base case US$350m, the amount it needed to replace a recent maturity.
The coupon was the lowest for a corporate deal out of the Philippines in 2024.
The deal’s success was particularly impressive given it was SMIC’s first since it issued a US$350m 4.875% 10-year note in June 2014. That meant plenty of work went into price discovery. Banks had received a range of feedback, but managed to price at the tighter end of the indications.
The number of accounts in the Reg S deal exceeded 100 – again a testament to the strong investor outreach efforts and arrangers’ broad distribution.
It meant the issuer was able to upsize from a base case of US$350m, which it had earmarked to cover a recent US dollar maturity, making it the largest corporate US dollar deal out of the Philippines since October 2021.
The quality of the book also meant the deal could be heavily allocated to real money accounts: fund and asset managers took 83%, banks and financial institutions 11% and private banks and others 6%. Asia took 87% of the bonds.
HSBC, JP Morgan, Standard Chartered and UBS were joint lead managers and joint bookrunners. BDO Capital and Chinabank Capital were joint lead managers.
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