$1B stock rights offering of BDO gets bourse nod

BDO Unibank Inc. has secured the go-ahead for its $1-billion stock rights offering as the company bolsters its capital base in preparation for its aggressive expansion.

In a statement, the country’s leading lender said the Philippine Stock Exchange (PSE) approved its plan to raise tier-1 capital through a rights offering for stockholders owning common shares. The rights offering was approved by the Bangko Sentral ng Pilipinas (BSP) last May 15.

“The capital raising is intended to support the growth and expansion of the bank amid the positive sentiments on the economy and at the same time strengthen the bank’s capital position in anticipation of new Basel III requirements,” BDO chairperson Teresita T. Sy said in a statement to the local bourse.

The company said the additional capital would give it a substantial buffer on top of the new minimum capital adequacy ratio requirement.

“The bank is optimistic about the outlook on the Philippine economy, driven by a strong consumer sector and opportunities in the SME [small to medium enterprises], middle market and large corporate sectors,” the bank said.

Citi, Deutsche Bank and JP Morgan were appointed as the transaction’s joint international lead managers and underwriters. United Overseas Bank Ltd. was appointed international co-lead manager and international co-lead underwriter, while BDO Capital and Investment Corp. was named issue manager and domestic underwriter.

The offer will be made available to eligible stockholders as of June 14, at a discount to the volume of the weighted average price of the bank’s common shares listed on the PSE for a period to be determined before Monday next week.

The final terms of the offer, including price and rights ratio, will be determined by BDO in consultation with the transaction’s managers. The offer period will be from June 18 to June 27.

Ever since the BSP announced the implementation of Basel III requirements at the start of the year, the country’s biggest banks have bared plans to beef up their capital as early compliance. The amount of money set aside by banks as buffer for risk-weighted assets—measured as a bank’s capital adequacy ratio—will be raised to 12.5 percent from the current 10 percent under Basel III regulations.

A bank’s capital must be composed more of tier 1—mainly common equity and of a higher quality than other types of capital, such as those raised from a bond sale. In particular, tier 1 capital requirement in the Philippines has been set at 7.5 percent, which is actually higher than the 4.5 percent prescribed under Basel III.