Two big corporations, Globe Telecoms and Aboitiz Power, have announced plans to issue corporate bonds for the retail investor—that’s you and me, supposedly.
Globe’s offering has already begun, and it will end on February 19 (that’s two days from now), while Aboitiz Power hopes to begin offering its retail bonds in the next three to four weeks.
In an interview with MoneySmarts, Aboitiz Power president and chief executive officer Erramon Aboitiz said the company would like to be less dependent on institutional investors, hence the decision to issue retail bonds.
Proceeds from the bonds will be used to finance many of the company’s power plant acquisitions this year, but Aboitiz also said the company had already raised sufficient capital.
“We don’t really need the money. This is just something extra,” he said.
Last December, Aboitiz Power had already sold P3.39 billion worth of debt notes for its expansion plans.
Philratings has already given the planned bond issuance its highest rating of PRS Aaa (triple A), meaning Philratings is confident you will get your money back when the bond matures. The choices are 3-, 5-, and 7-year placements, and returns are expected to be around 7.5% to 9% per annum, with a minimum investment of P100,000.
You can get access to these bonds through the lead managers, which are BDO Capital and Investment Corp., BPI Capital Corp., First Metro Investment Corp., and the Manila branch of ING Bank NV.
For the Globe Telecom issuance, the lead managers are BPI Capital, BDO Capital and First Metro. The February 2012 bonds carry a coupon rate of 7.5 percent, payable quarterly, while the February 2014 bonds have a coupon of 8 percent.
Alijeffty Gonzales, managing director of ACG Advisors and Management Ltd. Co. and a registered financial planner, said these retail corporate bonds are ideal for investors who want regular cash flows (retirees, for example) and for people who are starting to build their investment portfolio.
Bonds are generally less jumpy compared with stocks, and thus provide some measure of stability to an investment portfolio. They also pay interest like clockwork, and this is perfect if, say, you are expecting your son to start going to medical school in five years or for your house construction to begin in three years. In short, for little risk and less bother, you get a steady return.
Let’s say you put in P100,000 in Aboitiz Power’s five-year bond at 8% interest and hold it until it matures in 2014. You will be paid P8,000 per year in interest and when the bond matures in 2014, you will get your P100,000 back. For a P1-million investment, that’s P80,000 interest per annum, taxed 20% of course.
(It doesn’t sound as attractive as Celso de los Angeles’ double-your-money in three years? DON’T get me started on that!)
If you are drawn to these bonds and feel like they are a good alternative to your time deposits, here’s an advice from Jeff: hold them to maturity. That’s because when interest rates go up (as they might in the next couple of years), bond prices fall. If you decide to sell them before the maturity period and find that interest rates have gone up, you might not get the original amount you paid for them. Be aware also that they do not have the compounding returns of your time deposits.
Retail corporate bonds, anyone?
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interesting kay lang I'm not in the country :)
problem with corp bonds is they are hard to get at times. Palakasan kasi yan. For a small time investor or walk-in they won't sell it to you, specially BDO.
Are retail corporate bonds taxable? I thought the interest returns are tax-free unlike time deposit.
Infinitely superior investment compared to pre-need, no doubt! Just familiarize yourself with Globe and Aboitiz :)
On the other hand, 8% before tax (rates above are taxable, right?) seems a bit on the low side. Wala na bang corp bonds with 10-12% rates these days? Oh well. It still beats regular time deps.
The minimum investment is too steep for me.
Ma'am Salve, ano po masasabi nyo sa ACPA (Ayala Corp Preferred Class A shares). It pays 8.88% dividend? Can it be compared to retail corporate bonds?
Definitely beats SDA too.
hmmm... maka-inquire nga.
zack, i agree with you. minsan, sasabihin ng bank manager na 1M ang minimum investment pero pag tinanong mo sa iba 50K lang.
Yup palakasan sa mga bank officers. I experienced it with the Globe bond offer. Spent half of the day calling every branch of BPI asking for a reservation. Yung isa ang sabi call BPI Capital. When I called them ayun, ang sabi the bank officers should be the one to contact them. Magulo di ba? Actually due to increased interest Globe has decided to hike the bond offer from 3B to 5B, so I think small investors and unvalued customers can still get this bond offering.
I actually posted about this last week. I hope some of you noticed my post and got hold of the bond offer.
http://mytwentyfivecents.wordpress.com/2009/02/13/globe-telecoms-p3-billion-bond-issue/
yup.. interesting but i'm not in the country. at naka-time dep pa yung money ko. :(
is there a way to know what corporate bonds are available? and how/where to avail them?
Most articles I read says it's a 100k minimum investment but when I went to BDO, they told me they're offering the bonds for a minimum 1m. I feel it's very unfair for us young starters.
@ pow, corp bonds are taxable, but this can always be negotiated.
I did my queries already and found out that Globe Telecom's retail corporate bonds are sold out.
But our lady friend at the bank said that there are other corporate bonds to be launched soon and to make reservations daw kasi paglaunch ubos agad. So make your queries na rin mga kapatid.
Ay sorry for the misinformation. What I was told was the 3-year bonds are sold out but the 5-year bonds of Globe Telecom are also fast becoming sold out.
Yes Harley, its unfair for starters like us. That's why it is best to build a relationship with your bank or branch to give you tips on upcoming bond offers. Surfing the internet will also help. I am also hearing that San Miguel is floating a bond offer, but with their current shopping spree (Petron, Meralco, Bayan Trade, Qatar), I don't think Mr. Ang will use my money into good use.
@ zack: I doubt if the 20% tax on interest can be negotiated. It's one of the easiest taxes to collect and BIR is simply so revenue-hungry!
You can enter bonds in your Phil Equity Retiremt Account (PERA) to make it tax-free. But I dunno how hard it is to meet criteria for exemption. It pays off income regularly so it might have a hard time qualifying for PERA and tax exemption.
I suddenly remember why I don't have appetite for peso bonds anymore. USD Bond UITFs are an even better option! They invest in RP-issued $-denominated bonds, terrific yields at around 5%, and it's tax-free! Yun nga lang $ bond investors risk capital flight from RP and govt having a hard time settling their $ obligations. Risks vs Rewards - your choice. Risk isn't there yet but it's anyone's guess what awaits RP in 2010. What's sure next year: hitik naman sa balita at tsismis ang Inquirer hehehe :D
Another lesson from this: try to keep a good track record of transactions with just one trusted bank (mine's BDO, for instance) and make yourself known to the Branch Manager! That way they don't shortchange you with opportunities like this. After all, they're just humans and they're more confident dealing with 'valued clients of good moral character', compared with walk-in customers just interested in retail bonds and whose conduct they're not exactly sure of.
BPI Family has this 5-Year Term SDA called "Plan Ahead". Current interest rate is at 6% p.a. with PhP100K minimum lodgement (it was 6.5% p.a. last Sept 2008). It's tax-free as well, hence comparable to the corporate retail bond offering after tax. PS Bank has something similar, if not exactly the same mechanics.
One nice thing about it is that you can opt to get the monthly interest payment scheme or get the compounded interest earning at term date.
Here's how it works: for a P1M lodgement
1. Opting for a monthly repayment scheme at 6% p.a. - You'll get PhP 5K every month for 5 years and get the whole P1M initial deposit at end of term.
2. Opting the compounded interest scheme at 6% p.a. - You'll get P1.338M+ at end of the term.
One more thing, the deposit is guaranteed to the full amount (atleast that's what the BPI Family bank manager told me).
Hope this helps.
question: how can i open a PERA account?
nohj, last i heard, the PERA Bill has been passed but the implementing rules and regulations have not been finished. We will find out how to set up PERA accounts from the IRR. It's getting to be a loong wait, isn't it? :) Will update you as soon as I hear anything.
thanks salve and best regards
We dont know the Branch Manager of our local BPI branch, but we know a bank personnel and she handles most of our transactions and knows us by name and faces. Madali talaga ang transactions if you know somebody na sa bank mo.
@chapipoy. Meron pa lang ganyan? Mas ok ahh... and bigger % ang bigay kesa regular SDA.
@mzkukuro... in case you want to know more about it, refer to the link below:
http://info.bpiexpressonline.com/bpiprod/prodserv.nsf/BPI+Deposits/PlanAhead
If you want to look at their current rate offering, on their site's top navigation tabs, just click on "Rates" >>> "Deposit rates" >>> "Time Deposit"
If you want to know more about PS Bank's similar offering (they called it "Prime Time Deposit"), here's the link to that as well - http://www.psbank.com.ph/global/system.php?LS=staticpages&id=1190021812901
Hope this helps.
il bonds in the next three to four weeks. In an interview with MoneySmarts, Aboitiz Power president and chief executive officer Erramon Aboitiz said the company would like to be bag factory.
I agree with you. You have given to us with such an large collection of information. Great work you have done by sharing them to all
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Last December, Aboitiz Power had already sold P3.39 billion worth of debt notes for its expansion plans. Philratings has already given the planned bond issuance its highest rating of PRS Aaa (triple A), meaning Philratings is confident you will get your money back when the bond matures. The choices are 3-, 5-, and 7-year placements, and returns are expected to be around 7.5% to 9% per annum, with a minimum investment of P100,000.
Best regards, Alex, CEO of youtube video downloader
They also pay interest like clockwork, and this is perfect if, say, you are expecting your son to start going to medical school in five years or for your house construction to begin in three years. In short, for little risk and less bother, you get a steady return.
Best regards, Katya, CEO of data burning software, iscsi target iqn
".....the reverse is true if the bank rate drops". That's not always true as we've seen over the last 18 months. However you've fundamentally missed the main point about the CB market as far as new investors are concerned. It is far more complicated than you make out and most Ginault Watches
brokers have little understanding of the differences in bond classes. They usually mix up PIBS; Preference shares; ECN's; Subordinated Bonds etc. etc. all into one class of investment. A bond the issuer may have the option to pay you a different rate rather than simply re-pay your coupon. So check that out. So be aware of what you are buying and make sure it's not a "perpetual headache". I think a nice little article in Moneyweek explaining the differences and consequences in plain language would be useful.
If you talk about money investment let me tell you something I read online. If you take 30,000$ and invest it for a period of 30 years with bank that offers interest, after 30 years, period which will be the same with your retirement, you will have close to 1,000,000$... cheap stuff online
Corporate bonds are some of the safest and best return investments in the world. if you're looking to invest, you must take a look a these. Huskies for Sale
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