On 13 October 2016, International Container Terminal Services, Inc. (“ICTSI”) and Royal Capital B.V. (the “Issuer”) announced the results of the Issuer’s offer to holders (“Securityholders”) of its 6.25% senior perpetual capital securities callable in 2019 (“NC19 Securities”) and 5.50% senior perpetual capital securities callable in 2021 (“NC21 Securities”, and together with the NC19 Securities, the “Old Perpetual Securities”), both guaranteed by ICTSI, to tender Old Perpetual Securities for cash (the “Tender Offer”).
An aggregate nominal principal amount of US$345,453,000 in the Old Perpetual Securities was submitted by Securityholders in the Tender Offer (the “Tender Instructions”) of which US$160,314,000 comprised tenders of the NC19 Securities and US$185,139,000 from tenders of NC21 Securities. The Issuer offered Securityholders a price of US$1,067.50 per US$1,000 in principal amount of the NC19 Securities and US$1,057.50 per US$1,000 in principal amount of the NC21 Securities. ICTSI and the Issuer accepted all Tender Instructions submitted.
In addition, on October 13, 2016, the Issuer successfully priced a US$375,000,000 offering of senior perpetual capital securities, guaranteed by ICTSI (the “New Perpetual Securities”). The New Perpetual Securities were structured to constitute equity under International Financial Reporting Standards and represent ICTSI’s third successful issuance in this format.
The New Perpetual Securities confer a right to receive distributions at a rate of 4.875% per annum and were priced at 99.225%. The New Perpetual Securities shall rank pari passu with all other outstanding unsubordinated obligations of the Issuer, who will have the right to redeem the New Perpetual Securities on May 5, 2024 and any semi-annual distribution payment date thereafter. The rate of distribution for the New Perpetual Securities will be reset every five years from May 5, 2024 and will increase by 2.50% per annum on May 5, 2024, in each case if the New Perpetual Securities were not already redeemed by the Issuer. Consistent with the requirements for equity under IFRS, the Issuer may resolve, at its discretion, to defer payment of distribution otherwise payable on a distribution payment date.
The New Perpetual Securities were widely distributed with fund managers accounting for 46%, private banks for 30%, and banks for 24%. By geography, Asia took up 82% with Europe at 18%.
The transaction is significant in several respects. The Tender Offer is the first such transaction targeting repurchase of U.S. dollar perpetual securities in Asia this year. Meanwhile, the New Perpetual Securities achieved the longest non-call date for any Asian corporate hybrid security to date. ICTSI remains the only Philippine issuer to have offered U.S. dollar senior perpetual securities in the international debt capital markets. Moreover, the New Perpetual Securities set a record-low U.S. dollar distribution rate for a Philippine corporate perpetual security, a significant reduction relative to the NC19 Securities and NC21 Securities.
ICTSI Senior Vice President and Chief Financial and Compliance Officer Rafael D. Consing remarked, “This capital management exercise is strategic and value accretive in many respects. The two most important of which are the extension of the call duration on almost half of ICTSI’s outstanding senior perpetual securities, and securing guaranteed annual cost savings from the lower distribution rate. We are pleased to have achieved these objectives particularly given the volatile market backdrop.”
Citigroup Global Markets Limited, The Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank acted as Joint Lead Managers and Joint Bookrunners for the New Perpetual Securities issuance and as Dealer Managers for the Tender Offer.
ICTSI operates a total of 30 common user container terminals located in 20 countries, with a focus on facilities having total annual throughputs ranging from 50,000 to 2,500,000 twenty-foot equivalent units (TEUs).