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Jollibee to refinance Smashburger’s $80-M loan

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HOMEGROWN fastfood giant Jollibee Foods Corp. (JFC) is planning to refinance Smashburger Master LLC’s $80-million loan as it focuses on ensuring the long-term growth prospects of the Denver-based burger chain.

In a disclosure to the stock exchange on Thursday, JFC said it has signed a commitment letter with Smashburger’s parent SJBF LLC for the payment of loan, which is set to mature on May 15.

JFC said it will then switch to long-term financing for the loan, with lower costs and more lenient terms, noting its plan to borrow from banks or issue loan guarantees on Smashburger’s behalf.

“A much lower cost long-term financing, made possible by JFC’s strong balance sheet will significantly improve the net income of Smashburger immediately. It will also enable Smashburger to make more meaningful investments for healthier and faster growth,” JFC Chief Finance Officer Ysmael V. Baysa said in a statement.

SJBF posted a net loss attributable to the parent of $29.56 million in its fiscal year ending Jan. 1, 2017, with total revenues of $216.12 million for the period, according to financial statements disclosed by JFC.

“Smashburger has positive EBITDA. We look forward to the business making positive net income contribution to JFC‘s profit in the medium term and significant profit contribution in the long term,” Mr. Baysa said.

At the same time, JFC also disclosed its wholly owned unit Bee Good! Inc. (BGI) signed on Thursday the share purchase agreement to acquire a 45% stake in Smashburger. With this, JFC’s ownership in the firm will now stand at 85%, from 40% previously.

The $100-million deal is expected to be completed in the next one to two months.

The transaction will increase the US operations’ contribution to JFC’s worldwide sales to 15% from 5%. International businesses will then account for 30% of the firm’s worldwide systemwide sales from   20% currently.

In terms of store network, this increases JFC’s coverage by 9.6%, as Smashburger’s 365 outlets will bring JFC’s worldwide portfolio to 4,162 stores. The acquisition further expands JFC’s business to 21 countries, adding Costa Rica, Egypt, El Salvador, the United Kingdom (England and Scotland), and Panama.

JFC’s attributable profit jumped 15% to P7.089 billion in 2017, driven by a 15.6% increase in revenues to P131.57 billion as the company saw a record number of store openings during the period.

The fastfood giant ended last year with a total of 3,797 stores, 16.5% higher than what it had in 2016. This year, JFC looks to continue its global store expansion as it accelerates capital spending to P12 billion, from its actual spending of P8.8 billion in 2017.

Shares in JFC lost P9 or 2.96% to close at P295 apiece at the Philippine Stock Exchange on Thursday. — Arra B. Francia