SMC plans to lower dollar-denominated debt as peso weakens

By Krista Angela M. Montealegre, Senior Reporter

San Miguel Corp. (SMC) plans to further trim down its dollar-denominated debt, as the peso weakens and interest rates go up.

San Miguel Head of Treasury Eduardo Sergio G. Edeza told reporters on Monday, March 19, the diversified conglomerate has reduced the share of foreign obligations to “less than 30%” of total debt from “a little over 40%” five years ago and intends to bring them down further to “as much as can be done.”

“For a local company, it is better to borrow in peso para (so that) all your costs are clear,” Mr. Edeza said on the sidelines of the listing of SMC’s P20-billion fixed-rate bonds at the Philippine Dealing and Exchange Corp.

“If you can shift everything to peso, why not? The only constraint will be the absorptive capacity of the bond market and the (banks’ single borrower’s limit).”

San Miguel has been refinancing its dollar-denominated debt to temper foreign exchange losses. Proceeds from the latest P20-billion bond float — the third tranche of the company’s P60-billion bond shelf registration earlier approved by the Securities and Exchange Commission — will be used to refinance existing foreign obligations or invest in its business units.

San Miguel, however, is not in a hurry to tap the remaining P10 billion worth of bonds and P30 billion worth of preferred shares under shelf registration unless it has to fund a big-ticket project.

“It is a timing matter because we just issued (P20 billion worth of bonds so) we’ll have to wait,” Mr. Edeza said.

The SMC executive expects the peso to trade between the range of P49 to P52 to a dollar, with a break of the P52.50 level possibly triggering a further weakening of the currency.

The peso has been depreciating against the US dollar amid market concerns on the prevailing current account deficit following a surge in imports attributed to the government’s infrastructure program.

SMC is embarking on a P700-billion capital expenditure program in the next five to seven years to further expand its infrastructure, fuel and oil, food and beverage, and power businesses.

Shares in SMC added P1 or 0.71% to close at P139.50 apiece on Monday.