September 2, 2021 – D&L’s maiden bond offering garnered strong support from fixed income investors as total bids received amounted to P13.8 billion, which is equivalent to 4.6x the base offer size of P3 billion. In light of the robust demand, D&L’s management expects the exercise of the oversubscription option of up to P2 billion. Upon full exercise of that option, the issue size will increase to P5 billion, composed of a P3 billion bond with a tenor of 3 years (Series A Bonds) and a P2 billion bond with a tenor of 5 years (Series B Bonds).
Interest rates were set at the tight end of the marketing range given the favorable response from investors. The Series A Bonds will carry a coupon rate of 2.7885% p.a., which is equivalent to the average 3-year PHP BVAL rate from August 24 to 26, 2021 plus a 50 bps spread. The Series B Bonds will carry a coupon rate of 3.5962% p.a., which is equivalent to the average 5-year PHP BVAL rate from August 24 to 26, 2021 plus a 60 bps spread. Interest payments will be made quarterly in arrears.
Philippine Rating Services Corporation (Philratings) rated the bonds PRS Aaa with Stable Outlook, the highest rating assigned by the agency. D&L tapped China Bank Capital Corporation as the sole issue manager, lead underwriter, and sole bookrunner of the milestone bond offer.
The proceeds from the bond issuance will be used primarily to finance the company’s expansion plans in Batangas and the corresponding working capital requirements. Construction of the said plant started in late 2018 and commercial operations are expected to partially commence in May 2022. Total estimated capex for the said facility amounts to approximately P8 billion, with around P3.5 billion remaining to be spent.
“We are overwhelmed with the strong support the fixed income community has shown us in our debut bond issuance. This has allowed us to price our bonds at among the lowest rates in Philippine corporate bond history. This maiden offering will be a useful financial exercise for the company and will allow us to fully fund our Batangas expansion, which will be the next leg of growth for the company. We are looking forward to May 2022 when commercial operations finally start,” remarked D&L President & 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 levels. 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 debt, 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.
D&L Industries is a Filipino company engaged in product customization and specialization for the food, chemicals, plastics and consumer products ODM industries. The company’s principal business activities include manufacturing of customized food ingredients, specialty raw materials for plastics, and oleochemicals for personal and home care use. Established in 1963, D&L has the largest market share in each of the industries it serves, as well as long-standing customer relationships with the Philippines’ leading consumer and manufacturing companies. It was listed on the Philippine Stock Exchange in December 2012. For more information, please visit //www.dnl.com.ph/investors/.
This press release may contain some “forward-looking statements” which are subject to a number of risks and uncertainties that could affect D&L’s business and results of operations. Although D&L believes that expectations reflected in any forward-looking statements are reasonable, D&L does not guarantee future performance, action or events.