Megawide Construction Corp. plans to repay up to P4 billion worth of debts this year as part of its debt liability management program.
Megawide chairman, president and chief executive Edgar Saavedra said during the company’s recent annual stockholders meeting the company would manage its balance sheet by reducing its debt-to-equity ratio to 1.4x from the current 1.9x times.
“This will help ease interest expense, enhance margins and strengthen the balance sheet to boost shareholder value,” Saavedra said.
Megawide said it planned to repay P4-billion debt within the next six to 12 months to achieve the target.
The company did not say how it planned to do this, but indicated that this would not involve sale of assets or raising additional debts.
This will result in roughly P240 million in savings from interest expense for the company, based on the company’s current average 6 percent interest cost.
D/E ratio is financial metric used to gauge compare a company’s total liabilities to shareholders’ equity. It is a measure of the degree to which a company is financing its operations with debt rather than its own resources.
Megawide’s total liabilities stood at P30.6 billion, while shareholder equity was at P16.4 billion as of end-2023.
Aside from P240 million savings from interest expense, reducing debt level will also help the company achieve its target P1 billion net income for this year, up from P283 million recorded in 2023.
The Securities and Exchange Commission (SEC) approved Megawide’s plan to raise up to P5 billion bond worth of fixed rate bonds in June.
The bonds will consist of series C bonds due 2027, series D bonds due 2029 and series E bonds due 2031. Interest rates for Series C has been set at 7.6348 percent per annum, Series D at 8.0580 percent per annum and Series E at 8.4758 percent per annum.
Megawide said it would use the proceeds from the fund-raising activity to refinance its existing debt obligations and funding of business development opportunities as well as other general purposes.
The bonds will be listed in the Philippine Dealing & Exchange Corp. on July 11.
