BDO selling debt notes worth P5B

Local banking giant Banco de Oro Unibank will launch on Monday a P5-billion sale of long-term debt instrument to boost its capital and finance business expansion.

In a statement, tycoon Henry Sy’s banking arm announced the sale of unsecured subordinated notes—a type of debt instrument that qualify as tier 2 or supplementary capital.

The bank will publicly offer the notes from June 6 to 17 with issuance set for June 27.

The interest rate will be based on the 10-year PDST-F, a local interest rate benchmark, and will be finalized at the end of the two-week offer period.

The debt sale comes as many banks in the Philippines and abroad seek to increase their capital adequacy ratio to serve any rise in loan demand amid the improving global economy, as well as meet, if not surpass, international standards.

BDO earlier obtained authority from banking regulators to issue P15 billion in debt notes qualifying as tier 2 or supplementary capital over a one-year period as part of its expansion plan.

BDO will be 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 Bangko Sentral ng Pilipinas.

The planned notes will mature in 10 years and three months, but the bank will have the option to call or redeem the notes after five years from issue date.

The notes will pay quarterly interest and will be tax-exempt for individual investors if held for more than five years.

Deutsche Bank AG and HSBC are joint lead arrangers. The two foreign banks also act as selling agents, along with Multinational Investment Bancorporation. BDO, BDO Private Bank and BDO Capital will serve as limited selling agents.

As of March 31, BDO’s capital stood at 14 percent of its risk assets while the annualized return on average common equity settled at 11.4 percent. The capital adequacy ratio level is higher than the 10-percent minimum ratio required by the BSP.

BDO is the country’s largest bank in terms of assets, now worth more than P1 trillion.

It is currently working on the acquisition of Export and Industry Bank.

The bank posted an unaudited net profit of P2.44 billion in the first quarter of 2011, up by 18 percent from a year ago.