FINANCIAL RESEARCH FIRM CreditSights has maintained its outperform recommendation on San Miguel Global Power Holdings Corp. (SMGP), highlighting the company’s long-term prospects and perpetual bond yields exceeding 7%.
The research firm views the current yields as appealing amid an improving credit outlook, revival of funding access, and reduced risks of perpetual bond extensions, supported by earlier and current exchange and tender offers, CreditSights said in a report authored by analysts Lakshmanan R, Jonathan Tan Jun Jie, and Nicole Chua.
SMGP is set to issue a new unrated perpetual non-call 5.25-year bond with a minimum annual coupon of 8%.
This issuance aims to fully or partly redeem its existing unrated $176-million 5.95% bonds due in May 2025, $351-million bonds due in October 2025, and $593-million 5.7% bonds due in January 2026 through concurrent exchange and tender offers.
The research firm estimates the fair value of the new perpetual non-call 5.25-year bond at current treasury 5.25-year + 358 basis points (bps) or 7.9%, expecting the bond to price at 8.125%, with potential to tighten by 22 bps to their fair value estimate in the secondary market, CreditSights said.
CreditSights advised investors to trade their old SMGP bonds for new ones. For bonds due in May 2025, investors will receive the face value of the bond plus an extra 1.5% in cash, and for bonds due in January 2026, they will get the face value of the bond.
CreditSights said this exchange may provide attractive returns over time and noted an improved outlook for SMGP’s long-term financial health, which supports its recommendation.
For May 2025 bondholders who are not comfortable with SMGP’s longer-term credit outlook, CreditSights advised tendering the bonds at $101.
For October 2025 bondholders, it recommended holding onto the bonds if they are uncomfortable with the long-term outlook.
CreditSights said SMGP’s move to issue new perpetual bonds and manage its existing debt reflects its approach to improving its financial stability and credit profile. — Sheldeen Joy Talavera
