Monde Nissin diverts use of IPO proceeds

Food manufacturer Monde Nissin Corp. said Tuesday it will re-channel the use proceeds from its initial public offering from capital expenditures to debt payments.

Monde Nissin said in a disclosure to the stock exchange its board of directors approved the change in use of IPO proceeds, previously earmarked for capital expenditures, to pay down the majority of the remaining term loans of P15.6 billion.

This strategy will result in interest expense savings for the company of about P700 million, assuming interest rates remain at current levels, the company said.

“This action was done to avoid the significant negative carry associated with large cash balances as these have substantially lower investment returns than the interest payments on the outstanding debt,” the company said.

Despite the change in the use IPO proceeds, Monde Nissin said the P26.5 billion three-year capital expenditure plans and growth strategy of the company would remain unchanged and would now be funded by operating cash flow and lines of financing already available.