Investors swarm D&L's maiden bond float

MANILA, Philippines — The maiden bond sale of D&L Industries Inc., a listed manufacturer of specialty chemicals and food ingredients, was met with great investor demand, helping the company borrow funds at much cheaper costs.

Orders placed by investors for the bonds amounted to P13.8 billion, nearly five times bigger than the offer’s original size of P3 billion, D&L said in a disclosure to the stock exchange on Friday.

The robust demand prompted the company to exercise an oversubscription option of up to P2 billion, bringing the total proceeds from the bonds sale to P5 billion. Broken down, P3 billion of “Series A Bonds” will mature in 3 years while P2 billion of “Series B Bonds” has a longer payment term of 5 years.

The overwhelming orders booked, in turn, pushed down borrowing costs for D&L. Interest charged for the debt papers — as determined by a coupon rate — stood at 2.79% per annum for the Series A Bonds and 3.6% per annum for the Series B Bonds. Interest payments will be made quarterly in arrears

“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,” Alvin Lao, company president and CEO, said.

D&L tapped the debt market at a time it is recovering from the coronavirus onslaught. In the first half, earnings grew 74% year-on-year to P1.4 billion while consolidated income is already at pre-pandemic level, as all business segments “posted significant recovery”.

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 capital expenditure for the said facility amounts to approximately P8 billion, with around P3.5 billion remaining to be spent.

As of 12:08 p.m., shares in D&L were trading flat at P8.30 each. — Ian Nicolas Cigaral