BDO raising $700M in historic debt issuance

BDO Unibank, the country’s largest lender, is raising $700 million from an offshore medium-term senior debt notes offering, marking the largest single debt issuance by a Philippine bank to date.

The notes maturing in 5.5 years will be issued at a price of 99.909 per 100 and will have a coupon of 2.95 percent per annum, BDO said in a press statement on Wednesday.

“The senior note issue is part of the bank’s liability management initiatives to tap longer-term funding sources to support BDO’s lending operations and general corporate purposes,” the bank disclosed to the Philippine Stock Exchange on Thursday.

The transaction was overwhelmingly oversubscribed, with orders reaching $2.2 billion, BDO said, reporting wide distribution of the notes across Asia Pacific and Europe. The settlement will be on Sept. 6, 2017.

This issuance is the second offering under BDO’s $2-billion medium-term note (MTN) program set up in 2012. BDO had tapped an initial $300 million from this program in October last year.

The MTN is a type of debt program that allows an issuer like BDO to tailor-fit its debt issuance to its financing needs.

The new notes to be issued by BDO were rated Baa2, the ninth highest rating on the scale of international credit watcher Moody’s. This is the same rating that the Philippine government received from the debt watcher.

Moody’s said its credit rating of Baa2 had taken into account BDO’s “domestically focused, prominent, and growing franchise; stable asset quality and loss-absorbing buffers; sufficient capital levels that exceed regulatory minima; stable profitability, supported by a gradual expansion in its net interest margin and robust funding and liquidity profiles.”

It has taken into account, however, downside risks to loan quality “posed by a relatively unseasoned loan book and high concentration in the manufacturing sector.”

BofA Merrill Lynch, HSBC and Wells Fargo Securities acted as joint lead managers and joint bookrunners, while Mizuho Securities and MUFG acted as co-managers for the transaction.

BDO’s latest issuance will be listed on the Singapore Stock Exchange.

Following a successful P60 billion ($1.2 billion) stock rights offer in January 2017 alongside retained earnings, BDO’s capital base expanded to P289 billion, with capital adequacy ratio (CAR) and common equity tier 1 ratio at 15.7 percent and 14 percent, respectively.

Led by the SM group, BDO has one of the largest distribution networks among Philippine banks, with more than 1,100 operating branches and over 3,700 automated teller machines nationwide. It also has a full-service branch in Hong Kong and 26 overseas remittance and representative offices in Asia, Europe, North America and the Middle East.