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Stock Commentary

AREIT applies to SEC to sell up to P15 B in bonds through shelf-registration

Merkado Barkada
AREIT applies to SEC to sell up to P15 B in bonds through shelf-registration

The company issued a clarification yesterday about a story reported in the Manila Bulletin that AREIT [AREIT 40.10 5.76%] had applied to the SEC to sell P15 billion worth of bonds through a shelf-registration, and that it would sell up to P3 billion worth of those bonds in the first tranche of the proposed issuance.

AREIT confirmed that the bond information quoted about the registration is accurate, but noted that the use of the proceeds is restricted to refinancing, instead of what was reported in the article (“capital expenditures, refinancing and general corporate purposes”).

MB BOTTOM-LINE

Companies like AREIT will do what they can to refinance their debt obligations while rates remain low and the chorus of those calling for the BSP to begin raising rates grows in volume.

As mentioned before, juggling debt is a necessary skill for companies where the use of debt is central to the business plan, like in real estate. As one CEO mentioned to me recently, it’s really a no-lose situation for a company to refinance its old debt with new debt, when the new debt is at a much lower rate or on more comfortable terms.

Changes like that can have a huge impact on working capital, and can give the refinancing company a greater degree of operational freedom.

I don’t think this transaction is a signal that AREIT is sweating under the burden of its past debt obligations; in-line with what the CEO said, it’s probably more likely that AREIT just saw an opportunity to improve its bottom-line by refinancing some old debt. Maybe just a case of strong corporate debt hygiene.

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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