Petron offering $550M in senior securities

Petron Corporation has drafted a final offering for its planned issuance of United States (US) Dollar-denominated senior perpetual capital securities worth $550 million (Php26.7 billion) to settle its debts and to fund other corporate purposes.

In a follow-up disclosure to the Philippine Stock Exchange on Tuesday, the country’s largest oil firm also said that the initial rate of distribution is pegged at 5.9% per annum. The oil giant first approved the senior notes’ offer on April 8.

Petron is expected to rake in $547.8 million (Php26.6 billion) net of commissions.

The notes will be listed on the Singapore Exchange Securities Trading Ltd. (SGX-ST) and will be available “in denominations of US$200,000 and integral multiples of US$1,000 in excess thereof,” with an increase in rate of distribution of 2.5% per annum.

The expected closing date of the oil giant’s senior notes was set on April 19, while payout days will be every six months beginning October 19. The securities are also not for sale in the US.

According to Investopedia, perpetual bonds — such as senior perpetual capital securities — are fixed income securities with no maturity date and are not redeemable, or cannot be withdrawn. A major advantage, however, is that these regularly give interest payments forever.

The issuance of the senior notes comes as Petron will be benefiting from the passage of Republic Act 11534, or the CREATE Law, which will grant tax breaks to oil refineries.

Petron’s Bataan oil refinery remains closed because of losses mostly due to low margins and low demand caused by the COVID-19 pandemic. The oil giant also suffered a drastic net loss of Php11.4 billion in 2020.