Jollibee Foods Corp. (JFC) on Monday said it plans to issue up to P12 billion worth of perpetual preferred shares by September after securing the approval of its shareholders last week.
The preferred share sale, which the company said is the first in its corporate history and the first in the Philippine food service industry, would still need the go signal of the country’s regulators.
Proceeds of the share sale will be used to buy back some $250 million of the $600 million in perpetual securities it issued in January 2020.
The issuance of preferred shares and the buyback of its US dollar perpetual securities are part of an overall plan to strengthen the company’s balance sheet, JFC said.
“Once all are executed by December 2021, JFC would have fewer debt obligations, more distributed financial maturities over the next few years, lower foreign exchange risks, and better leverage and debt servicing ratios,” the company said.
These transactions will support the company in maintaining its capability to finance its profitable growth, which is forecast to accelerate in the next months and years, as the group plans to open about 450 new stores in 2021 and at least 500 new stores per year in the next few years.
Jollibee said it will file an application with the Securities and Exchange Commission for the shelf registration of up to 20 million peso-denominated, cumulative, non-voting, non-participating, non-convertible, redeemable perpetual preferred shares to be issued during a shelf period of up to three years from the effective date of the registration statement.
It will sell the said preferred shares at P1,000 apiece or a total of P20 billion. The company said it will initially offer P8 billion worth of preferred shares and an oversubscription option of up to P4 billion.
“The initial issuance shall be issued in one or two series and may have step-up dividend rates if they are not redeemed on the third or fifth anniversary of the issue date,” the company said.
The said preferred shares will come from the reclassification of existing authorized and unissued common shares, and as such it will not increase the total number of authorized shares in the company’s equity base. The issuance of preferred shares will also not change the current cash dividend policy on the company’s common shares which is to declare as cash dividends 33 percent of its net income attributable to common equity holders of Jollibee.
JFC said shareholders approved the amendment to the articles of incorporation which pertains to the company’s primary purpose to provide it with greater flexibility to restructure its legal entities to further improve its efficiency and effectiveness in pursuing its core business in food service.
The amendment to the articles of incorporation clearly and expressly state, for the avoidance of doubt the authority of the company and its subsidiaries to invest in, acquire, own, use and dispose of real and personal properties, of every kind and description, when such activities are done in pursuit of its business objectives.
The amendment will enable the company to avail of a broader choice of corporate structures, securities and financial instruments available in the financial and commercial markets which will enhance its economic productivity with respect to the use of real estate properties needed to pursue it primary business purpose.
“As a point of clarification, JFC will not allocate more resources in real properties as the intention behind this amendment. On the contrary, one of the benefits that will arise from this amendment will be that through restructuring of its legal entities, the company will own lesser real properties in the future and will improve its cash flows,” it said.
Jollibee said it has also allowed the election of two Singaporeans—Kevin Goh and Ee Rong Chong—to its board as part of its corporate governance measures.
Goh is currently the chief executive for Lodging of CapitaLand Group, one of Asia’s largest diversified real estate groups, while Chong is an accomplished business leader and active board member, with extensive experience across corporate and non-profit organizations.
Jollibee said it has built over the years significant economic interests based in Singapore, including Jollibee Worldwide Pte. Ltd. (JWPL), a wholly owned unit based in the small Southeast Asian nation. The said company owns most of Jollibee’s businesses outside of the Philippines including those in China, Vietnam, Middle East and Europe. JWPL is also the issuer of the company’s dollar bonds worth $1.2 billion.