SM PRIME Holdings, Inc. (SMPH) is set to issue up to P20-billion worth of bonds, which were given the highest credit rating by the Philippine Rating Services Corp. (PhilRatings).

In a statement, PhilRatings said the Sy family-led property giant is planning to issue P15 billion worth of bonds, with an oversubscription option of up to P5 billion.

This is the initial tranche of SMPH’s three-year shelf registration debt securities program of up to P100 billion.

PhilRatings assigned a PRS Aaa credit rating to the bonds, which means these obligations are “of the highest quality with minimal credit risk.” The rating was also given a stable outlook, which means it is unlikely to change within the next 12 months.

“The issue rating reflects SMPH’s strong brand equity; its solid track record across a well-diversified portfolio; its sound financial profile, supported by strong recurring income; and the company’s highly-experienced board and management,” the local credit rating agency said.

SMPH, a subsidiary of SM Investments Corp. (SMIC), has four operating segments — malls, residential, commercial, and hotels and convention centers.

For the first nine months of 2019, SMPH reported a net income attributable to equity holders of the parent of P27.59 billion, 18% higher than the P23.43 billion a year ago.

This was on the back of a 14% rise in consolidated revenues to P85.03 billion during the nine-month period. Rental revenues jumped 8% to P44.91 billion “due to strong tenants’ sales, rental rate escalations, and expansion of leasable areas and temporary selling areas.”

As of end-September, the company had 73 malls with a gross floor area (GFA) of 8.5 million square meters (sq.m.) in the Philippines, and seven malls in China with a GFA of 1.3 million sq.m.

“Average daily pedestrian count for the (Philippine) malls was 4.2 million. Average mature mall occupancy rate was a high 97%, as of September 30, 2019. Overall same-mall sales growth in the first nine months of 2019 was 7%, year-on-year,” PhilRatings noted.

SMPH currently has 12 office buildings with a combined GFA of 662,000 sq.m., as well as eight hotels, four SMX Convention Centers and three Megatrade Halls.

“Recurring cash flows from SMPH’s expanding mall, office and hotel/convention center portfolios support its strong liquidity position and sound capital structure. Out of total rental revenue, 88% is contributed by malls, and the rest from offices, hotels, and convention centers,” PhilRatings said.

“Operating cash is expected to remain as SMPH’s primary funding source for growth-related capital expenditures, as completed rent-generating projects further contribute to the Group’s stable cash flows. Strong internal cash generation has allowed SMPH to keep its sound leverage position, with debt kept at very manageable levels,” it added.

Meanwhile, PhilRatings also kept the PRS Aaa credit rating and stable outlook on the company’s outstanding rated bonds worth P100 billion. — CRAG