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Stock Commentary

Megawide to sell P4 billion preferred shares

Merkado Barkada
Megawide to sell P4 billion preferred shares

Megawide [MWIDE 6.28 1.29%] filed paperwork with the SEC to sell up to 40,000,000 preferred “Series 4” shares, at a price of P100/share.

The Series 4 shares are “perpetual, cumulative, non-voting, non-participating, non-convertible, redeemable (non-reissuable)”, and like MWIDE’s other pref batches, Series 4 will be listed on the PSE under its own ticker: “MWP4”. 

According to the prospectus that MWIDE provided, the proceeds will go directly to redeeming a previous preferred shares series, Megawide Construction Corporation Perpetual Preferred Shares [MWP 101.60 0.40%]. It’s a case where MWIDE is just paying off old debts using new debts under slightly better terms for MWIDE.

MB BOTTOM-LINE

Preferred shares can be a great way for a company to borrow money, because the method is so flexible. Unlike bank loans, preferred share offerings can be written in a way to provide the company with the ability to pause interest payments, or to repay the entirety of the debt all at once under the terms of the offer.

Lots of large corporations borrow funds from investors in this way, especially those that are working in businesses that have intense capital requirements that cannot be easily funded through earnings, like Petron [PCOR 3.16 1.28%] or San Miguel [SMC 110.00 unch]. In this respect, MWIDE is no different. It’s main source of income is the completion of construction projects for clients, but those novelty check, photo-op moments don’t happen in a constant fashion. They’re spread out across different projects over many years.

MWIDE does its best to manage its projects to “smooth” the income across the different times of the year, but with residuals from its other businesses muted due to COVID, the gaps between project completions are probably more pronounced than they’ve ever been. Seems like MWIDE is just tending to its debt garden as any gardener should.

 

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MEGAWIDE CONSTRUCTION CORP PETRON CORP. PHILIPPINE STOCK EXCHANGE SAN MIGUEL CORP.
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