First Pacific has raised US$199 million through the sale of bonds exchangeable into shares of its Philippine telecommunications unit in a move that will give the company much-needed financial flexibility for new investments. 'On the whole, this financing exercise will strengthen our financial position and supply us with the resources to grow our investments, as well as capture potential expansion opportunities available in the region,' managing director and chief executive Manuel Pangilinan said in a statement. However, the Hong Kong-based investment holding company said 'no specific acquisition is currently contemplated'. One analyst, who declined to be named, said the bond issue - besides lowering First Pacific's debt-servicing costs - would put the firm in a more proactive position. In the past few years the management has basically been unable to do anything because it did not want to reduce the equity stake in its three main assets which focused on telecommunications and consumer food products in the Philippines and Indonesia. Thin dividend payments from those companies also meant it had virtually no cash, and since the firm is already trading at discount to net asset value of about 30 per cent, issuing equity would have meant reducing the value per share further. 'There is no point in leaving the company as it is and since this is not expensive money I do think it is a positive move, even if they haven't yet highlighted any specific investments,' the analyst said. Fixed-income investors were also positive. The offer was 'two to three times covered' which allowed it to be increased from the original US$150 million, said Peter Guenthardt, the head of equity-linked origination at UBS, which arranged the deal. The buyers comprised a mix of Asian, European and offshore US investors and was fairly evenly split between outright investors and hedge funds, he said. The five-year zero-coupon bonds have a yield to maturity of 5.625 per cent and are each exchangeable into 340 Philippine Long Distance Telephone (PLDT) shares. If converted in full, the notes will exchange into 6.8 million shares, about 4 per cent of PLDT's outstanding share capital. The conversion premium is 21 per cent above PLDT's closing price on Tuesday, or a conversion price of 1,645.60 pesos per share. Investors also have the option to receive 2,171.70 pesos per share in cash instead of converting the bonds, which would translate into a 32 per cent premium to Tuesday's close. Investors may also sell the notes back to the issuer at 118.11 per cent of their value on the third anniversary, while First Pacific has the option to buy them back for cash starting from the fourth year if PLDT's shares trade more than 30 per cent above the principal and accreted redemption premium. 'The notes represent an efficient form of financing for us, with the aggregate value of the notes in excess of the market value of the underlying shares. Also, the notes are unsecured obligations at interest rates that are comparatively lower than our historic cost of borrowing,' Mr Pangilinan said. He also stressed that the company had no plans to cut its 24.3 per cent stake in PLDT and it did in fact have the option to settle the exchange rights in cash.