First Gen to issue P7 billion in shares to raise funds

business mirror

WEDNESDAY, 11 MAY 2011 19:35 PAUL ANTHONY A. ISLA / REPORTER

LISTED First Gen Corp. (First Gen) is looking at issuing P7 billion worth of perpetual preferred shares in the second half of the year to raise funds.

In a press conference after its annual stockholders’ meeting on Wednesday, First Gen chief financial officer Emmanuel Singson told reporters that proceeds from the share issuance will be used to pay down maturing debt obligations in the near term.

“That will take care of paying upcoming maturities in 2012 and 2013. It can be used to pay down maturing debts next year and the convertible bonds due to mature on 2013 as well,” Singson said.

In his presentation First Gen president and chief operating officer Francis Giles Puno said the company is preparing to pay down its debts amounting to P5 billion and $130 million due to mature on 2012 and 2013, respectively.

“In our minds we need to reduce our debts in favor of equity,” Puno said.

He added that funds to be raised may also be used to finance its acquisition of BG Energy Holdings.

“We also have a $75-million call option on EDC [Energy Development Corp., one of its subsidiaries] of First Gen shares so we have to fund that also. Hopefully we’ll do that by March next year. The call option is the one we entered into with the EDC shares owned by the STI group led by Eusebio Tanco,” he said.

“Our net income showed improvement, as the gas projects had slightly increased but very steady. We grew our income from EDC’s contribution to the net income, as well as the reduction in financing costs. We were able to reduce debt through our rights offering,” Puno said.

In January 2010 taking advantage of the highly liquid market, First Gen was able to raise P15 billion through a rights offer, which, Puno said, was practically oversubscribed—validating investors’ renewed confidence in First Gen.

First Gen, according to Puno, also signed three loans last year—a P3.75 billion five-year loan with the Banco de Oro (BDO) group, a six- and seven-year $142-million syndicated loan from a consortium of local and foreign commercial banks, and another $100 million in six- and seven-year notes also from BDO.

These transactions, he said, generated savings on interest costs by
prepaying costlier debt and extinguishing short-term debt. First Gen’s consolidated interest-bearing debt level decreased by 11 percent—or $130 million—from $1.13 billion in 2009 to $1 billion in 2010.

First Gen said funds from the January 2010 rights offer were used to fully pay the P5 billion five-year bond that matured in July 2010 and buy back $754 million of First Gen convertible bonds in anticipation of a put option date in February 2011.

In addition, Red Vulcan Holdings Corp. (Red Vulcan), the affiliate that directly owns 40-percent common shares and 100-percent preferred shares of EDC, likewise benefited from lower interest expense by reducing debt by 40 percent or P5.5 billion to P8.3 billion from the P13.8 billion, while Prime Terracota Holdings Corp., the entity that owns Red Vulcan, fully paid its debt of P2.5 billion.

FG Hydro, the owner and operator of Pantabangan-Masiway hydro plants, successfully raised a P5 billion 10-year term loan from the Philippine National Bank and Allied Banking Corp.

In June 2010 EDC also signed a $175-million loan with a consortium of foreign banks to augment its working capital.

Also last year EDC fully paid its Miyazawa II yen loans, as well as its loans from the Philippine National Oil Co., which were outstanding legacy loan obligations from when it was still government-owned.