November 20, 2014

AC raises US$275 in top-up share placement

In a disclosure to the Exchange today, Ayala Corp said it raised US$275m from a top-up offering involving some 18.8m common shares. The shares were priced at P660/sh, a 5.2% discount to the 30-day volume weighted average closing price. The proceeds from the equity raising will be used for investments in power and infrastructure projects.

AC parent Mermac Inc is the seller in the placement tranche and subscriber in the subscription tranche, and will thus maintain the same number of common shares (303.69m). Its effective ownership in AC, however, will be reduced to 49.09% form 50.56% while free float flat will improve to 40.02% from 38.23%. Post transaction, AC’s outstanding common shares will increase by 3.1% to 619.428m.

Our take: Although the potential dilution is small at just 3%, the announcement comes as a big surprise and we expect the stock to react negatively. The company has repeatedly emphasized that it had sufficient leeway to lever up and indeed, during its investors’ briefing just last Friday, the company said that it had sufficient capacity to support its sizable investments over the next two years.

Parent cash as of end-September amounted to P30.4b while gearing was manageable at 0.69x. On a consolidated basis, net debt-to-equity ratio is even lower at 0.32x with net debt at P45.38m. By the end of 2016, the company said gearing should remain healthy at 0.41x, supported by strong cash dividend inflows from its various investments.

We also note that AC last year got an approval from the SEC for the issuance of 100m in carved-out common shares that are exempted from pre-emptive rights. The top-up placement is just 18% of these carved-out shares. – WealthSec