Asuncion, Lulu February 18, 2020

3FM1
Assignment 1
As the homegrown fast-food giant Jollibee Foods Corp. (JFC) has extended its
presence in many countries, Jollibee continues its expansions in the Philippines due to
the high volume of orders, it never tends to stop its footprints. Despite many constraints,
it continuously grows and expands over all the countries. This January 2020, Jollibee
announced that it had successfully priced its U.S. dollar-denominated insured senior
perpetual capital securities with an effective dividend rate of 3.9 percent, non-call (5
years) and payable semi-annually for a US$ 600 million Reg S. Jollibee Worldwide Pte.
Ltd, a wholly owned subsidiary of JFC will be assigned to issue the Securities. This
investment marks JFC's first ever bond or perpetual securities issued and the first time
since its initial public offering in 1993 that JFC has entered the capital markets. This
issuance by an Asian restaurant company is one of the first. As announced by JFC in its
press release of 9 January 2020, the proceeds from the bid are primarily intended to
refinance the short-term debt arising from the purchase of International Coffee and Tea,
LLC (The Coffee Bean & Tea Leaf ®), completed on 24 September 2019, as well as to
fund projects consistent with the general corporate goals of Issuer, while the securities
will be taken into account as equities. The management's aim for this issue is to further
improve JFC's balance sheet and build a stronger base for increasing its development
to fulfill its vision of becoming one of the world's top 5 restaurant firms.
In order to solve the problem of the firm, optimal solution is a must, because it
will be the best solution that the firm could decide. If there would be managerial
problems in managerial economics, there would be many choices available, and a
manager must be able to choose the best and suitable for the firm, at the same time
gives benefits to the firm. Managerial decisions are important because of its applications
of economics plus management. Management is essential to a business because this
arranges the production factors assembles and organizes the resources, and efficiently
combines the resources to achieve targets, which are also affected by the economic
factors. With the help of economics, managers are able to look for the optimum
solutions in order to reach the goal of profit maximization.
Just like Jollibee did, in order for them to recover the debt for purchasing The
Coffee Bean and Tea Leaf, they decided to issue bonds. Issuing bonds may be the
optimum solutions that their company chose to be rather than to borrow a loan from the
bank or other financial institutions. This is because the interest rate companies pay
bond investors are often cheaper than the interest rate that they would have to pay to
get a bank loan. One of the considerations would be the money paid out in interest
detracts from corporate profits and companies are in business to generate profits,
minimizing the amount of interest payable to borrow money. The issuance of bonds also
gives firms significantly greater freedom to operate as they see fit, as it releases them
from the constraints often attached to bank loans. In order for them to put up on this
decision, I’m sure that JFC had done certain forecasting based on the economic
circumstances, that led them to make up a choice of issuing securities, and this is
managerial economics.

Reference:
Lam, C. (2020, January 25). Jollibee to Issue $600m Guaranteed Senior Perpetual
Securities. Retrieved from
https://www.businessnewsasia.com/2020012552314976-jollibee-senior-perpetual-securi
ties/