Sy bank raising $2B from IOU sale abroad
Funds for relending to PPP infrastructure projectsBy Doris C. Dumlao
Philippine Daily Inquirer
The country’s leading financial institution Banco de Oro Unibank is raising up to $2 billion from an overseas debt facility to boost funds for long-term relending, including funding for big-ticket infrastructure projects under the government’s public-private partnership (PPP) program.
In a disclosure to the Philippine Stock Exchange on Monday, the bank unveiled plans to set up a $2-billion Euro Medium Term Note (EMTN) program and retire P10 billion in tier 2 debt by November this year.
“These are part of the bank’s liability management initiatives to tap longer-term funding sources and lower funding costs,” the disclosure said.
The EMTN program is a medium-term foreign currency funding facility that gives flexibility to issue foreign currency-denominated notes in the international capital markets. These are offered on a continuing basis rather than a one-time deal like a bond issue, thus making it easier for an issuer like BDO to tap offshore capital markets.
EMTNs, which are issued and traded outside of Canada and the United States, are sold directly to the market with maturities of less than five years. The issuer maintains a standardized document and usually sells through preselected buyers.
“Setting up the EMTN program is a preparatory move on the part of BDO as this will enhance the bank’s ability to access longer-term funding for relending to projects like infrastructure under the government’s PPP program,” the disclosure said.
BDO also plans to exercise the early redemption option on its series 1 Tier 2 notes by November 21.
“Part of the proceeds from BDO’s recent stock rights offer has already been earmarked for the redemption of these higher-cost notes, which carry a coupon rate of 7 percent. The retirement of these notes will reduce the bank’s cost of funding as well as improve its capital structure in favor or higher quality core or tier 1 capital,” the disclosure said.
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