First Pacific upsizes bond to raise $400 million

Hong Kong’s First Pacific attracts strong demand for its bonds, allowing the issuer to raise an extra $100 million.

Investors snapped up $400 million of 10-year bonds offered by First Pacific, a Hong Kong-based investment company, late on Monday night. The company originally planned to borrow just $300 million but, with orders for more than 11 times that amount, it took the opportunity to raise an extra $100 million.

The bonds pay a fixed 6.375% coupon and were issued at par. The company, which has operations in telecommunications, infrastructure, foodstuffs and natural resources, says it will use the proceeds to repay at least $250 million of its floating-rate debt, leaving it with just $50 million of borrowings in floating-rate form. With a 10-year maturity, the new bonds also extend the term of First Pacific’s overall debt to more than six years.

The company last came to the bond market in July, when it raised $300 million from a fixed-rate issue that paid 7.375% and was secured by shares in Metro Pacific. This time, investors took comfort from the fact that the bonds are secured by shares in Philippine Long Distance Telephone (PLDT).

“This bond offering comes at an auspicious time for First Pacific, coming on the heels of strong first-half earnings and continuing success in our capital management programme,” said First Pacific chief executive Manuel Pangilinan. “The issue was 11.3 times oversubscribed, signalling a high degree of confidence in First Pacific by the financial markets.”

First Pacific reported an increase of more than 50% in recurring net profit to $191.9 million in the first six months of 2010 and, earlier this year, it launched a two-prong capital management programme with a commitment to pay at least 25% of recurring profit to shareholders as dividends and buy up to HK$1 billion of First Pacific shares as part of a two-year share repurchase programme.

The company’s investments in Indofood in Indonesia and Metro Pacific in the Philippines contributed most of the growth. Indofood, Indonesia's largest producer of instant noodles among other things, earned bigger margins in all its businesses, while Metro Pacific booked impressive returns from its 17.4% stake in Meralco, the biggest electricity distributor in the Philippines, and a doubling of the contribution made by subsidiary Maynilad, the country's biggest water distributor.

First Pacific's share price has risen almost 50% since a $282 million rights issue last October to fund growth in the company's mining and infrastructure investments. It moved into mining in the Philippines in late 2008 when it bought Philex Mining. Most of the company's other principal investments are also in the Philippines, including a large interest in PLDT.

Credit Agricole CIB and Standard Chartered Bank were joint bookrunners and lead managers for the Regulation S bond offering.

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