Aboitiz Equity Ventures [AEV] to pay small premium for early redemption of 2015 Series B Bonds

Aboitiz Equity Ventures [AEV 42.05 0.59%], Aboitiz Family’s holdco, said that it would exercise its early redemption option for the 2015 Series B fixed rate bonds by paying 100.5% of the face value of the bonds (P8.467 billion) on August 6, 2021.

The Series B bonds are a 7-year, fixed rate (5.0056% per year) bond, scheduled to mature in 2022, which means that this move will allow AEV to get this obligation off of its books and replace it with some new obligation at a lower interest rate.

When the bonds were sold in 2015, AEV said that the proceeds were “crucial for AEV’s continued overall growth”; the company eventually used the money to “finance its cement venture” (JV with CRH Plc for acquisition of Lafarge assets). AEV said that refinancing higher-cost debt with cheaper debt would be an “ongoing theme for AEV this year”.

MB BOTTOM-LINE

This transaction is similar to what Petron [PCOR 3.57 0.83%] announced that it was doing yesterday by filing for the huge shelf registration of “new bonds” to pay off the higher-interest “old bonds”. It’s just refinancing, which is a fancy word for “making debt marginally better in some way”.

The original bond sale in 2015 was used to grow the business (buy assets through a JV), and now that rates are way lower (and the company can’t find a better use for the money), AEV is doing what it can to improve its bottom line profitability. I don’t know that the exact proceeds of AEV’s June P10 billion bond sale will be used in the early redemption of specifically these 2015 Series B bonds, but cash is fungible and both transactions fit the overall refinancing strategy pretty well.

This is pretty normal activity for a mature/stable holdco. It’s responsible financial hygiene.

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