Biz Buzz: Poorly executed deal

On the surface, the government’s sale of P100 billion worth of retail treasury bonds (RTBs) last week looked like a success. But the sentiment was very different among some banks involved in the deal. For one, a number of financial institutions were left confused (and later on, upset) by some unusual events on the government side.

You see, there is a rule that the setting of coupon rates for these bonds should be done in increments of 1/8th of a percentage point (e.g. 0.125, 0.25, 0.375, 0.5, 0.625, etc.). And this is where it becomes confusing. According to our sources, the Treasury accepted bids from banks all the way up to 3.624 percent—just 0.001 percent shy of the 3.625 percent level that would be divisible by 1/8th of a percent—but then proceeded to round the rate to 3.5 percent.

“They were just short of 0.001 percent, so why didn’t they set the coupon rate at 3.625 percent,” one banker said. “The banks who bid all the way to 3.624 percent were duped. You will be awarded but your coupons will be rounded down.”

These bankers were especially upset at the Treasury’s decision given that the government’s rationale for issuing retail bonds was to try to entice more small investors to participate in the bond market—something that can only be done if retail investors trust the government and the banks to give them the best possible returns on their hard earned money.

And there was another element that upset some participants. Around the time the coupon rate for the 10-year RTBs were set at 3.5 percent, the rate on the secondary market for 9-year debt securities already stood higher at 3.6 percent.

“Why would any bank tell a client to invest in a 10-year bond at 3.5 percent when there’s a bond that gives you 3.6 percent over a shorter period?” another banker commented, incredulous at what he called the Treasury’s “poor deal execution.”

This same banker also urged the Securities and Exchange Commission to protect the investing public by looking into the deal. “Why would banks sell a bad product to their unsuspecting, unsophisticated retail clients?” he asked, adding that both the Treasury and the banks should be looking out for the interests of these small investors rather than their own. “If they were big institutional buyers, no problem. But we’re talking about small investors who trust you.”

The banker said the poorly executed RTB deal—including the apparent difficulty the Treasury had in raising the cash, which used to go to as high as P150 billion—would not have happened under the watch of retired Deputy Treasurer Ed Mendiola. (Another suggested that the brouhaha could have also been avoided if former investment banker Jojo Dispo were still active in the market.)

So Biz Buzz asked around to find out who was behind the fiasco and got this reply: “Who else but the ‘Three Musketeers’? The ‘Brights Boys’ of the Department of Finance at the Treasury.”

Bankers, for future reference, you have been warned. Daxim L. Lucas

Deal breaker

PANLILIO-LED Boulevard Holdings Inc. (BHI) had been looking forward to a property deal with property giant Ayala Land Inc. over Puerto Azul resort developer Cala Paniman, but this did not come to fruition. Now, BHI has Gregorio “Greggy” Ma. Araneta III, son-in-law of the late strongman Ferdinand Marcos, to blame for it.

In a disclosure to the Philippine Stock Exchange last week, BHI said ALI had withdrawn from the BHI-Cala Paniman deal because Greggy Araneta had spoken to one ALI shareholder (presumably to discredit BHI). The Panlilio group also accused Araneta of having transmitted “bogus papers” in December to Rockwell Land Corp. “to unsuccessfully scare off the Lopezes and forestall our deal.”

In the disclosure, BHI offered no explanation of any motivation by Araneta. But this could be related to legal disputes between the Marcos heirs and the Panlilios. In 1999, the Marcos heirs sought the cancellation of titles to several pieces of real property in Puerto Azul. According to the grapevine, the Marcos heirs are now running after property ceded under a “trusteeship agreement” with the old patriarch Rebecco Panlilio, father of BHI chair Jose Marcel Panlilio. After many years in exile, the “nominee” has become the new landlord. Doris Dumlao-Abadilla

Customer experience plum to PSBank

IT LOOKS like the thrift banking arm of the Ty family’s Metrobank Group just earned another feather in its cap.

Apparently, there’s an award that recognizes banks for their customer service. That’s given under the Customer Experience Awards. Philippine Savings Bank bested other financial institutions in the region and got a bronze in the “best customer experience award category.” The bank also got an honorary mention for its “interactive and friendly” customer service.

According to PSBank president Vicente Cuna Jr., they actually employ a dedicated team focused on providing clients with a good banking experience.

The award became more meaningful as it came just before PSBank celebrates its 56th anniversary today. Miguel R. Camus