PNB raises P6.5 B from tier 2 notes

MANILA, Philippines—Tycoon Lucio Tan-led Philippine National Bank has raised P6.5 billion from the sale of 10-year debt notes qualifying as tier 2 or supplementary capital, boosting funds for future growth.

The country’s fifth largest bank upsized the offering from the original target of P5.5 billion and shortened the offering period given brisk demand for the tier 2 notes.

The coupon rate was fixed at 6.75 percent per annum until the maturity of the notes in 2021, right within the earlier target range of 6.5-7 percent. PNB has the right to redeem the notes after the end of the fifth year, subject to certain regulatory conditions.

It was the first publicly offered tier 2 notes offered under the revised guidelines covering qualifying capital instruments of the Bangko Sentral ng Pilipinas.

A tier 2 note is a debt instrument eligible as compliance to globally-accepted capital adequacy requirements as they are counted as supplementary capital.

“We are pleased with the success of this landmark issuance.  We believe that the volume of demand for the PNB tier 2 notes demonstrated the investors’ continuing confidence in PNB,” said PNB executive vice president and head of treasury group Horacio Cebrero III.

Proceeds will be used to refinance PNB’s P5.5 billion tier 2 notes that PNB has the option to redeem by August 2011.  The balance will be used to finance asset growth and boost capital base.

ING Bank Manila branch acted as lead manager and sole bookrunner for the issue. First Metro Insurance Corp. and Multinational Investment Bancorporation were selling agents while PNB, PNB Capital and Investment Corp. and Allied Banking Corp. were limited selling agents.

PNB has authority from the central bank to issue up to P10 billion for a period of one year but the bank plans to raise the remainder in succeeding months. The bank has chosen to raise fresh funds through a tier 2 offering instead of a tier1 or core capital issuance because the latter is deemed more expensive and will cause dilution to shareholders.

The bank also aims to resolve within this year the remaining stumbling block to its merger with Allied Bank Corp. and beat the record-high profit chalked up in 2010 with improved recurring earnings.

PNB sees “higher chance of success” of the PNB-Allied Bank merger being cleared this year given “constructive” discussions with US banking regulators on the sale of Allied Bank’s stake in California-based Oceanic Bank.  The sale of Allied Bank’s stake in the US bank is a precondition to US regulators’ consent to the much-delayed PNB-Allied Bank merger.