Fast-food giant Jollibee Foods Corp. (JFC) has obtained approval from the Philippine Stock Exchange to raise as much as P12 billion from a two-series offering of perpetual preferred shares.

Series A will carry a fixed dividend rate of 3.2821 percent per annum for the first three years, after which JFC will have to pay higher rates based on the prevailing seven-year benchmark plus a spread of 4 percentage points.

Series B will carry a dividend rate of 4.2405 percent per annum for the first five years, after which JFC will have to pay higher rates based on the 10-year benchmark plus a spread of 4 percentage points.

For both series, if the initial dividend rates are higher than the recomputed rates, the initial rates would be applicable.

Because of the steep costs, if left unredeemed, issuers of perpetual preferred shares with step-up rates typically exercise their option to retire these securities upon reaching the synthetic maturity.

JFC was authorized to sell to the public up to 12 billion preferred shares at P1,000 each. The base offering consists of 8 million shares, but there will be an option to upsize by 4 million shares in case of robust demand.

The public offering will run from Sept. 18 to Oct. 4, while the preferred shares will be listed on the main board of the local bourse on Oct. 14.

JFC has mandated BPI Capital Corp. As issue manager. The joint lead underwriters and bookrunners are BDO Capital & Investment Corp., BPI Capital Corp., China Bank Capital Corp. And SB Capital Investment Corp.

This issuance marks the first tranche of up to 20 billion worth of JFC preferred shares that the Securities and Exchange Commission has approved for shelf registration within the next three years.

The preferred shares are cumulative, nonvoting, nonparticipating, nonconvertible and redeemable perpetual.

Some of the net proceeds will be used for partial redemption of JFC’s senior perpetual securities. This is seen to strengthen JFC’s balance sheet and eliminate foreign exchange exposure by retiring US dollar perpetual bonds and reducing other debt obligations.

The rest of the proceeds will fund capital expenditures for new stores and a commissary.

JFC’s wholly-owned subsidiary, Zenith Foods Corp., is planning to build a new commissary in Cebu to support its business needs in Visayas and Mindanao.

This 2021, JFC plans to open 450 new stores across various restaurant brands here and abroad. Record-high capital expenditure of P12.2 billion has been budgeted.

JFC has said that the issuance of these preferred shares would not affect its annual cash dividend policy of paying out 33 percent of attributable net income.

Source: https://business.inquirer.net/331235/jollibee-selling-preferred-shares-at-p-1000-each-to-raise-p-12b