Union Bank sells debt notes worth P7.2B

Aboitiz-led Union Bank of the Philippines has sold P7.2 billion worth of debt notes qualifying as tier 2 or supplementary capital, raising fresh funds for expansion.

The issuance was increased from the base offer of P5 billion due to strong demand from both institutional and retail investors, UnionBank said in a disclosure to the Philippine Stock Exchange on Thursday.

The tier 2 notes carry a coupon rate of 5.375 percent per year and a tenor of 10 years and three months. Union Bank has the option to redeem the notes after five years and three months.

The primary purpose of the issuance is to increase and strengthen the bank’s capital base to support its expanding lending and investment businesses, the bank said.

The debt notes are eligible as tier 2 capital under the Basel 3 framework, which requires 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 requires a stronger firewall to protect banks especially during periods of stress.

“The overwhelming demand of investors in our tier 2 notes is not only a testament to their belief in UnionBank and our continuing growth story, but also a vote of confidence in the sustainability and trust in our business,” UnionBank president and chief operating officer Victor Valdepeñas said.

“We are also extremely pleased with and would like to thank BDO Capital & Investment Corp., our issue manager and lead underwriter, and Chinabank, our other underwriter, who were essential to the success of our offering,” he said.

Other parties to the transaction are Multinational Investment Bancorporation, the market maker and selling agent; UnionBank, limited selling agent; Deutsche Bank AG Manila – Investor Services, registrar and paying agent, and Development Bank of the Philippines-trust department, public trustee.

Local credit watcher Philippine Rating Services Corp. assigned a “PRS Aaa” rating on UnionBank as an issuer, the highest in its rating scale and one that suggests “very strong capacity to meet its financial commitments relative to that of other Philippine corporations.” Doris C. Dumlao