PNB to redeem P5.5 B in debt notes

MANILA, Philippines — Tycoon Lucio Tan’s Philippine National Bank will redeem ahead of maturity P5.5 billion in debt notes that qualified as Tier 2 capital using fresh funds raised from a newer and cheaper Tier 2 issuance.

In a disclosure to the Philippine Stock Exchange on Friday, PNB said it would redeem all of these Tier 2 or unsecured subordinated notes issued in 2006 upon the call option date of August 11 this year.

A Tier 2 note is a debt instrument that is eligible to be considered as supplementary capital in compliance with globally accepted capital adequacy requirements.

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 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 by the policy-making Monetary Board of the Bangko Sentral ng Pilipinas.

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 notes was fixed at 6.75 percent per annum until the maturity of the notes in 2021.