BDO doubles core capital with $1B equity deal

MANILA, Philippines–Banco de Oro Unibank has completed a landmark $1-billion stock rights offering that will double its core or tier 1 capital, positioning tycoon Henry Sy’s banking arm for further growth amid a regime of more stringent capital adequacy requirements.

In a press statement on Monday, BDO announced the conclusion of a stock rights offering whereby a total of about 895.22 million in new common shares were sold to existing investors at P48.60 each. The offer raised gross proceeds of P43.5 billion upon its closing on June 27.

The offering boosted the company’s tier 1 or core capital to 15 percent from 10 percent and overall capital adequacy ratio (CAR) to 20 percent from 15 percent based on existing capital adequacy guidelines. But even using the more stringent Basel 3 formula which will take effect January 2014, this capital hike is seen to keep the bank’s CAR at around 12.5 percent and tier 1 CAR ratio at 10 percent even if BDO were to increase its risk assets in the next two years.

This fund-raising, so far the largest equity deal in the local capital market, also makes BDO the largest bank not only in terms of assets but also in terms of capital base.

“This represents a key milestone not only for BDO but also for the Philippines, being the largest ever equity capital markets transaction by a Philippine issuer,” the bank said in a press statement.

By strengthening BDO’s core capital, the bank said this “provides a comfortable buffer to the more stringent Basel 3 capital requirements expected to be implemented by the BSP.”

Basel 3 introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.

“BDO believes the offer has better-positioned it to fulfill its medium-term growth objectives and take advantage of the positive outlook on the Philippine economy,” the bank said.

The offer was oversubscribed, with shareholders applying for shares beyond their entitlement, the bank said.

“The offer also saw strong participation from the bank’s domestic and international investors, despite challenging global market conditions,” the bank reported.

The completion of the offer enlarges BDO’s issued and outstanding shares to 3.58 billion.

Citi, Deutsche Bank and J.P.Morgan served as joint international lead managers and international underwriters of the offering. United Overseas Bank Ltd. acted as international co-lead manager and international co-lead underwriter while BDO Capital & Investment Corp. was issue manager and domestic underwriter.

BDO is the largest bank in the country with over P1 trillion in resources. It also has one of the largest distribution networks, with more than 770 branch licenses and over 1,645 automated teller machines nationwide.

Originally posted at 11:10 am | Monday, July 02,  2012