Metrobank to redeem P5.5-B tier 2 notes in October

MANILA, Philippines–Metropolitan Bank and Trust Co., the banking arm of GT Capital group, plans to redeem in October P5.5 billion worth of debt notes qualifying as tier 2 capital.

The redemption of the tier 2 notes issued in October 2008 allows Metrobank to avoid paying a step-up or increase in interest rate and booking capital depreciation from the instrument. The notes carried a coupon rate of 7.75 percent for the first five years.

Metrobank is thus exercising the option to redeem these notes, subject to approval from the Bangko Sentral ng Pilipinas, under a call option feature, the bank disclosed to the Philippine Stock Exchange.

Last October, Metrobank also exercised its call option and redeemed P8.5 billion tier 2 notes due in 2017.

Metrobank also disclosed that it was still awaiting approval from the Bangko Sentral ng Pilipinas to offer as much as $500 million tier 2 notes that are compliant with Basel 3 framework on capital adequacy.

This new issuance is seen allowing the bank to “proactively manage its capital base for growth and for refinancing of maturing capital notes.”

Universal and commercial banks are required by the Bangko Sentral ng Pilipinas to adopt by Jan. 1, 2014 the capital adequacy standards under Basel 3, which introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.

Basel 3-compliant tier 2 notes must have a provision for the instrument to either be written off or converted to common equity upon occurrence of certain trigger events.