MANILA, Philippines—Security Bank plans to raise as much as $250 million from an offering of debt notes qualifying as Tier 2 or supplementary capital under the Basel 3 framework.
Security Bank’s board has approved the plan to issue Basel 3-compliant Tier 2 bonds, which can be denominated in either pesos or US dollars, the bank told the Philippine Stock Exchange on Tuesday.
The proposed Tier 2 notes will have a tenor of 10 years but the bank will have the option to redeem them on the fifth year.
The pricing and offering period will be determined by market conditions and the date of Bangko Sentral ng Pilipinas approval, the bank said
“The Tier 2 bond issuance is part of the bank’s proactive capital and balance sheet management,” the disclosure said.
In order to sustain its healthy Basel 3 total capital adequacy ratio and support continued business expansion, Security Bank said it would have to capitalize on the markets’ robust liquidity. At the same time, the bank said, this offering would address market demand for viable alternative investment instruments.
Basel 3 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 against periods of stress.
Debt notes that are compliant to Basel 3 typically have a provision for the instrument to either be written off or converted to common equity upon occurrence of certain trigger events.
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