BPI to tap overseas debt market

Ayala-led Bank of the Philippine Island plans to tap the overseas debt market for the initial drawdown from a $2-billion medium-term note (MTN) facility set up earlier in the year.

In a disclosure to the Philippine Stock Exchange yesterday, the bank said it had mandated BPI Capital as sole global coordinator and joint bookrunner, as well as Deutsche Bank, HSBC and J.P. Morgan as joint bookrunners, to arrange a series of fixed income investor meetings in Hong Kong and Singapore, starting Thursday.

A Regulation “S” offering of dollar-denominated senior unsecured debt securities may follow, subject to market conditions, the disclosure showed. This means the offering, which is made outside the United States, is exempted from registration requirement in the United States.

“The notes are expected to be rated Baa2 by Moody’s, and, when issued, will constitute a drawdown under BPI’s medium-term note program,” the disclosure said.

Baa2 is the ninth highest in Moody’s long-term corporate obligation rating. Obligations rated Baa2 are deemed with moderate credit risk.

In June, BPI set up a medium-term note facility worth up to $2 billion to obtain flexibility in raising funds as needed. Such a program allows an issuer to have constant cash flow coming in from its debt issuance, typically with tenors of five to 10 years. This allows a company to tailor its borrowing to meet its financing needs.

These notes allow the issuer to register with the Securities and Exchange Commission (SEC) only once, using the shelf registration window, instead of every time for differing maturities.

A corporate MTN can be continuously offered by a company to investors through a dealer with investors being able to choose from different maturities. As such, they are different from corporate bonds because they can be offered to investors by the issuer’s agent instead of being underwritten by investment banks and then sold to the public in a tranche.