September 28, 2020
There is no drought of financing options for the country’s local companies as they can tap other non-bank sources to fulfill their funding requirements during the coronavirus pandemic, according to First Metro Investment Corporation, the investment banking arm of the Metrobank Group and one of the country’s largest domestic investment banks.
Daniel Camacho, head of investment banking of First Metro, said that despite the pandemic, companies continue to look for fundraising sources for working capital requirements, to refinance debt, or for acquisitions and other capital expenditures.
As the market staple for funding, banks will continue to lend, though more selectively. Mr. Camacho said the equity and debt markets will, however, remain viable sources of fundraising. “These are still accessible in the current environment, with the debt markets having a banner year” he said. “Investment banks like First Metro continue to help companies in their fundraising, primarily Peso bond issuances as well as other financial instruments that suit clients’ needs.”
With interest rates at historical lows, several companies are tapping the bond market now, and the rest of the year is quite full in terms of pipeline. “The regulatory environment is very supportive and market liquidity is ample,” he said, adding that First Metro recently led and completed the bond offerings of Aboitiz Power Corp. and Robinsons Land Corp. (RLC). These were followed by Ayala Land, Inc. (ALI) and SM Investments Corp. (SMIC), which are scheduled to be listed next week. First Metro is currently working on a few more bond as well as corporate note issuances for a prominent conglomerate, a top food and beverage player, a well-known real estate developer and a leading power producer.
He explained further, “Investor sentiment continues to be positive as the economy reopens but understandably interest is on the shorter end with tenors of five years and below. Despite the recent uptick in interest rates, it’s still a good opportunity to raise capital with borrowing costs at these low levels.”
Mr. Camacho said that real estate investment trusts or REITs is another fundraising option for property companies. “AREIT’s issuance and plans by DD Meridian Park bode well for this new product that was 10 years in the making since the law was passed in 2009,” he said.
Mr. Camacho expects the capital markets to remain active as companies adjust to the ‘new normal’ and as the government slowly opens up the economy. “Key is the trajectory of the virus infection. Will the curve flatten by year-end globally or will there be another wave?” he said. “Second is the policy response of the government to the health crisis and the current business climate,” Camacho explained, adding that other considerations of course include finding a safe and effective vaccine, further technological advancements that aid the new way we work, and the upcoming US elections and its impact on global trade.
Mr. Camacho expects the capital markets to remain healthy, especially when economic recovery happens in 2021 albeit cautiously. “We are eagerly awaiting consumer confidence to return and with their pent up demand boosting companies’ spending and investment, thus increasing issue volumes in the capital markets,” he added.