Metrobank rethinks $500M overseas borrowing plan

MANILA, Philippines—Local banking giant Metropolitan Bank and Trust Co. is rethinking a plan to source as much as $500 million in tier 2 or supplementary capital from the overseas market.

In a disclosure to the Philippine Stock Exchange on Wednesday, Metrobank said it had received the Bangko Sentral ng Pilipinas’ approval for the offering of peso-denominated debt notes qualifying as tier 2 capital.

The approval gives Metrobank the option to raise part, if not all, of its funding requirements from the domestic market instead. The option to shift some of the borrowing requirements to domestic sources allows the bank to pare down foreign exchange risks in a regime of strengthening dollar.

The disclosure added that the tier 2 note issuance would allow Metrobank to “proactively manage its capital base” to support its continued growth and refinance capital securities that were no longer eligible as tier 2 capital under the Basel 3 framework.

“The recent BSP resolution amends the terms and conditions of the bank’s previous approval and provides Metrobank the flexibility to issue the notes in either US dollar or Philippine peso, or a combination of both,” the disclosure said.

Universal and commercial banks were required by the BSP to adopt starting 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. This framework also extends the coverage of financial risks and puts in place stronger firewalls during periods of stress.

Basel 3-compliant tier 2 notes typically have a provision for the write off or conversion of the instrument to common equity upon occurrence of certain trigger events.

Metrobank has mandated ING Bank and Standard Chartered Bank as joint lead arrangers for the peso transaction.

Last year, Metrobank obtained the approval of its stockholders for the amendment of the bank’s bylaws to pave the way for the capital build-up to P100 billion (in par value) from P50 billion. The increase in capital was proposed to be implemented through the issuance of a mix of common and preferred shares.

In the meantime, Metrobank is building a two-storey commercial complex in Palo, Leyte as part of initiatives to rebuild local businesses. This complex will include the 8th Metrobank branch in the Leyte province, adding to its current roster of branches in the cities of Baybay, Ormoc, Tacloban and the municipality of Palompon.

The Metrobank group through Metrobank Foundation and GT-Metro Foundation organized various relief efforts in Leyte, including Palo, helping about 9,000 families affected by Super Typhoon Yolanda. For Palo, in particular, local fishermen were provided with fishing boats to rebuild their livelihoods.

To kick-off the group’s rehabilitation program for Palo, a P5-million donation was turned over to the Archdiocese of Palo for the restoration of the Transfiguration of our Lord Metropolitan Cathedral that was damaged during the typhoon. Still under the rehabilitation program, the group has also committed to build classrooms and rural health centers for the people of Palo.