Local banking giant Metropolitan Bank and Trust Co. is set to redeem $125 million of hybrid bonds issued in 2006 as they no longer qualify as tier 1 or core capital under the stringent capital adequacy framework adopted by banking regulators.
In a disclosure to the Philippine Stock Exchange on Thursday, Metrobank said its board had approved the buyback of these bonds on Feb. 15, 2016, exercising an option for the bank to redeem the notes.
The hybrid notes, being perpetual in nature, have no maturity but the bank is given an option to redeem them at a certain date or pay a “step-up” or higher interest rate.
The hybrid bonds were issued in 2006 pursuant to a trust deed with The Bank of New York (Trustee) and listed with the Singapore Exchange Securities Trading Ltd. They bear a coupon rate of 9 percent per annum payable semi-annually through Feb. 5, 2016.
If not redeemed, the rates will be reset and will be payable quarterly at 6.1 percent per annum above the prevailing Libor (London Interbank Offered Rate) for three-month US dollar deposits.
These hybrid securities are unsecured and subordinated to the claims of senior creditors.
Last year, the Bangko Sentral ng Pilipinas started the implementation of Basel 3 capital adequacy framework, which no longer recognizes instruments such as Metrobank’s hybrid securities as eligible tier 1 capital.
Metrobank has already beefed up its tier 1 capital by raising P32 billion from the sale of new shares to existing investors. It completed this stock rights offering last April with the issuance of 435.37 million common shares priced at P73.50 per share. Doris Dumlao-Abadilla