JG Summit begins non-deal roadshow

The Philippines conglomerate tests the water for a potential bond transaction.
JG Summit Holdings began a non-deal roadshow in Manila yesterday, managed by Credit Suisse and Deutsche Bank. The roadshow is heading to Hong Kong today and Singapore tomorrow. The company, one of the PhilippinesÆ largest conglomerates, will test investment sentiment to potentially price a high-yield bond to refinance its 2008 bonds maturing in June.

The company, rated B+ by Standard and PoorÆs, priced a $300 million bond in January 2006 via sole-lead Credit Suisse.

ôThe company is under no pressure to bring a deal to market right now. It enjoys a solid balance sheet, with a degree of liquidity against part of that leverage that it can use to refinance the bonds," says a source familiar with the credit. "The company typically keeps cash on its balance sheet of about one third of its total debt."

"But if the market is going to improve this side of the Chinese New Year, then it is likely to do so in the next couple of weeks," he continues. "If so, then the company can take advantage of that window in order to maintain its current capital structure."

In September 2007, the company recorded a net income of Ps1.23 billion, bringing its net income for the first nine months of 2007 to Ps5 billion, according to public financial information on the company. This compares to last yearÆs reported net income of Ps5.5 billion, which included a Ps3.21 billion gain from the sale of Universal Robina Corporation shares, a food company and subsidiary of JG Summit. Excluding this gain, the companyÆs recurring net income for the first nine months of 2007 increased by 113%.

This improvement stems from the record growth in net income made by its subsidiary Cebu Pacific, the leading domestic air carrier in the Philippines, which reported a Ps2.48 billion net income in the first nine months of 2007, versus just Ps236 million last year. Indeed, all of JG Summit's core businesses contributed to its growth, with the exception of its petrochemicals business, JG Summit Petrochemicals Corporation. The latter recorded a 41% decrease in sales.

Companies from the Philippines will find more room to tap the international markets this year since the sovereign has announced a considerably reduced borrowing programme of just $500 million for 2008. Moreover, the Philippines market is strong, with sovereign paper broadly outperforming global investment-grade and high-yield in the latter part of last year.

JG Summit Holdings is one of the leading companies in the Philippines. Its business interests lie in air transportation, banking, food manufacturing, hotels, petrochemicals, power generation, publishing, real estate and property development, telecommunications, and textiles.
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