RCBC, Cathay Life set to conclude deal

Yuchengco-led Rizal Commercial Banking Corp. expects to conclude this month a P17.92-billion deal for Taiwan’s largest life insurer Cathay Life Insurance Co. Ltd. to acquire a 20-percent stake in the bank.

“We’re documenting it. (In) December, we’re signing,” RCBC president Lorenzo Tan told reporters on Friday.

The Taiwanese insurer is buying about 280 million shares of RCBC at a P64 a share, of which 124.34 million will be primary common shares.

This primary portion will raise P7.96 billion in fresh capital, boosting its common equity tier 1 capital under Basel 3 framework from 10.9 percent to 13.5 percent.

Basel 3 introduces a complex package of reforms designed to improve the ability of banks to absorb losses. It also extends the coverage of financial risks and puts in place stronger firewalls against periods of stress.

The rest of the shares to be taken up by Cathay will consist of those held by CVC Capital Partners and part of the shares held by International Finance Corp. Tan said the transaction would give Cathay three seats on RCBC’s board.

With the fresh capital infusion from Cathay, Tan said there was no need to pursue the stock rights offering earlier planned by the bank to boost core or tier 1 capital.

Global credit watcher Fitch Ratings earlier said RCBC could benefit from an investment from Cathay in terms of improved capitalization, ability and flexibility to expand its balance sheet and provide cross-selling opportunities.

Fitch noted that Cathay Life’s investment was in line with its parent Cathay Financial Holdings’ long-term strategy to expand its business in southeast Asia. Doris C. Dumlao