BDO sells P6.5B worth of tier 2 debt paper

The country’s biggest lender, Banco De Oro Unibank, sold P6.5 billion worth of debt notes qualifying as tier 2, or supplementary capital, completing its P15-billion tier 2 buildup program.

BDO announced that due to strong demand from retail and institutional investors, it upsized the issue from the original P3-billion offer and shortened the selling period. The deal was closed on Friday.

The tier 2 notes were priced at 6.375 percent a year and will have a maturity of 10 years and 3 months from issue date. Individual investors are tax-exempt if the notes are held for more than five years.

The bank has an option to redeem the notes after five years and one day, subject to Bangko Sentral ng Pilipinas approval, or otherwise pay a higher interest rate.

In a press statement, BDO said this issuance would “supplement the bank’s capital position and support its business expansion plans.”

This was BDO’s second issuance of tier 2 notes this year following the sale of P8.5 billion worth of similar instruments last June.

Deutsche Bank, HSBC and Standard Chartered were the lead arrangers for the offering while BDO Private Bank and Multinational Investment Bancorporation were selling agents.

The debt sale comes as many banks in the Philippines and abroad seek to increase their capital adequacy ratio to cope with any rise in loan demand and meet, if not surpass, international standards. BDO was among the first local banks to sell tier 2 notes this year after the window to tap this instrument was reopened early this year with the issuance of a new framework for capital-raising by the BSP.

BDO is controlled by tycoon Henry Sy-led SM Investments Corp., which also owns the controlling stake in China Banking Corp. The group is also the biggest player in retailing and shopping mall development as well as a fast-growing participant in residential and tourism-oriented property development.