Jollibee Foods Corp. made its first trip to the offshore capital market in January 2020 and returned with $600 million. The fast-food chain priced a perpetual securities offering that drew almost 10 times the demand it had planned for, money it will largely use to repay the debt behind its purchase of The Coffee Bean & Tea Leaf.
A first for the chain
It was the first bond or perpetual securities issuance in JFC’s history, and the first time the company had tapped the capital market since its 1993 stock-market listing. It was also one of the earliest such deals by an Asian restaurant company, JFC said in a filing to the Philippine Stock Exchange.
The securities are issued through Jollibee Worldwide Pte. Ltd., a wholly owned subsidiary, and carry an initial rate of 3.9 percent over the first five years. They were sold under Regulation S, which bars them from being offered, sold or delivered inside the United States.
Orders came in well above the $400 million the company originally planned, which let it raise the size of the deal and cut the final price by 35 basis points from a first guide of 4.25 percent. The result, JFC said, was “the lowest pricing for a five-year perpetual securities issued by a Philippine company”. The securities carry no rating and will list on the Singapore Exchange Securities Trading Ltd.
Management framed the borrowing as groundwork for growth. “The objective of management for this issuance is to further strengthen the balance sheet of JFC and build a stronger foundation for accelerating its growth in order to achieve its vision to become one of the top five restaurant companies in the world”, JFC said.
Paying for Coffee Bean
Most of the proceeds are earmarked to refinance short-term debt from the deal that bought International Coffee and Tea LLC, the company behind The Coffee Bean & Tea Leaf, which closed on Sept. 24, 2019. The remainder will go toward the company’s other corporate needs. Citigroup and J.P. Morgan coordinated the sale globally, with Credit Suisse and Mizuho Securities among the bookrunners.
The Coffee Bean purchase drew some doubt at the time. Analysts worried about the drag on earnings while JFC was still absorbing the Smashburger chain, though the company said it expected to turn Coffee Bean around within 12 to 18 months. In 2018, Coffee Bean lost $21 million on $313 million in revenue, with earnings before interest, taxes, depreciation and amortization of $23.7 million.
Founded in 1963, Coffee Bean draws most of its business from the United States and South Korea, which hold 284 and 292 outlets. The Philippines is third with 139 stores. In Southeast Asia as a whole, the chain has 447 outlets; Indonesia holds 101 of them, Malaysia 99, and Singapore 61. Farther afield, it counts 36 stores in Kuwait, 28 in Qatar and 27 in India.
Sources
- Jollibee turns to offshore capital market for funds, raises $600M | Inquirer Business
- Jollibee to raise $600 million from securities issue | Philstar.com
