Land Bank debt note sale fetches P10.5B

Land Bank of the Philippines has raised P10.5 billion from the sale of Tier-2 notes, pulling off the largest-ever fund-raising activity by a bank in the domestic capital market.

In a statement released Thursday, Land Bank said the securities, denominated in pesos with a 10-year maturity, were oversubscribed.

The bank, which originally meant to raise P6.5 billion, gathered P12.5 billion worth of bids.

Land Bank ended up borrowing P10.5 billion during the entire offer period for the securities, which ran from January 9 to 20, taking advantage of the low interest rates fetched by the securities amid high market liquidity that pushed investor demand.

Call option

The coupon rate for the securities, which provide holders a call option on the fifth year upon issuance, was set at 5.875 percent per annum. This is below the 6 percent the bank initially expected and is the lowest coupon rate for a Tier-2 transaction in the domestic market, Land Bank said.

Proceeds of the fund-raising activity will help fund regular lending programs of Land Bank, which is tasked to help develop the country’s farm and fisheries sector through its assistance programs.

“The Tier-2 notes will further strengthen Land Bank’s capital ratios and provide us significant room to continue pursuing our mandate of supporting countryside development,” Land Bank President Gilda Pico said in a statement.

Arrangers

Institutions that served as lead arrangers and selling agents were Deutsche Bank AG (Manila branch), Hong Kong and Shanghai Banking Corp. Ltd., and Standard Chartered Bank.

Multinational Investment Bancorporation also served as a selling agent.

The sale of the Tier-2 notes followed an earlier announcement by Fitch Ratings that it would keep the state-owned bank’s credit rating at BB.

In an earlier statement, Fitch said that when it gave Land Bank a BB rating, or just a notch below investment grade, it took into account the bank’s liquidity and favorable earnings profile.

Adequately capitalized

According to Fitch, Land Bank will remain adequately capitalized even as it is required by law to remit half of its net income to the government.

Land Bank earlier reported that its net income amounted to P6.2 billion in the first seven months of 2011, rising 24 percent from the P5 billion reported in the same period of the previous year.

The bank said its profitability was driven largely by its sustained growth in lending, with focus on the agriculture sector.

The bank also reported that its outstanding loans to farmers and the fisheries sector as of end-July 2011 amounted to P16.6 billion—up 33 percent from P12.5 billion as of the same period in 2010.