PHILIPPINE NATIONAL Bank will redeem ahead of maturity P5.5 billion in debt notes that qualified as tier 2, or supplementary, capital using fresh funds raised from a newer and cheaper tier 2 issuance.
In a disclosure to the Philippine Stock Exchange Friday, PNB said it would redeem all its unsecured subordinated notes issued in 2006 upon the call option date of Aug. 11 this year.
The call option gave PNB the right to redeem the old 10-year tier 2 notes during the fifth year of issuance or otherwise pay a higher interest for the remainder of the term.
Coupon rate on these old tier 2 notes was at 10 percent per annum as the local interest rate regime was much tighter when these were issued five years ago.
The redemption by August will be subject to approval of the Bangko Sentral ng Pilipinas’ Monetary Board.
PNB’s retirement of the tier 2 notes will be funded by the P6.5 billion in fresh funds recently raised by the bank from the issuance of new tier 2 notes.
The coupon rate for the new tier 2 notes was fixed at 6.75 percent per annum until the maturity of the notes in 2021.
PNB, which is controlled by tycoon Lucio Tan, also has the right to redeem the new tier 2 notes after the end of the fifth year, subject to certain regulatory conditions.
The fifth largest bank in the country has the authority from the Bangko Sentral ng Pilipinas to issue up to P10 billion in new tier 2 notes for a period of one year.
But the bank plans to raise the remainder in the coming months.
It has chosen to raise fresh funds through a tier 2 offering instead of a tier 1, or core capital, issuance because the latter is deemed more expensive and will dilute shareholders’ stocks.
The bank also aims to resolve within this year the remaining stumbling block to its merger with Allied Bank Corp. and beat its own record profit which it chalked up in 2010 with improved recurring earnings. Doris C. Dumlao