PBB prepares capital-raising, P10B term deposit offering

Alfredo Yao. PHOTO BY LYN RILLON

Yao group-led Philippine Business Bank (PBB) is preparing to raise fresh funds from a mix of equity and debt in order to “exploit opportunities in the banking sector.”

PBB’s board has authorized management to “initiate capital-raising discussions,” the bank told the Philippine Stock Exchange on Thursday.

“Subject to regulatory approvals, PBB will convert existing preferred shares to common stock to further strengthen its balance sheet,” PBB said.

PBB currently has 62 million preferred shares with book value of around P620 million held by its controlling stockholder, the group of businessman Alfredo Yao who also controls the Zest-O group.

These preferred shares will be converted to common shares based on third party valuation. PBB is expected to soon appoint a financial adviser to undertake such valuation.

But even with some dilution arising from the conversion of preferred shares to common shares, PBB is still expected to meet the minimum public float required to remain listed on the PSE.

Meanwhile, PBB also plans to raise as much as P10 billion from the issuance of long term negotiable certificates of deposit (LTNCDs).

“The additional funding will allow the bank to capitalize on attractive lending opportunities as the Philippine economy continues to expand,” the disclosure said.

LTNCDs are negotiable certificates of time deposit issued by banks, with a minimum maturity of five years and denominated in Philippine peso. They usually have higher yields compared to regular time deposits or savings accounts.

Unlike regular time deposits, LTNCTDs cannot be pre-terminated by holders. However, investors can negotiate or transfer their holdings in the secondary market prior to maturity. Interest on LTNCTDs is tax-free for individual investors if the instrument is in the name of the individual holder and is held for at least five years.

These instruments are insured with the the Philippine Deposit Insurance Corp. subject to applicable rules and regulations on maximum insurance coverage.