The $20-million loan was made with International Finance Corp. (IFC), the investment arm of the World Bank. The agreement has a five-year term with interest rate lower than "the current average cost of money."
It is convertible into common shares of the bank starting from the third year of the disbursements. By the fifth year, the IFC would then be a considerable equity partner of the Henry Sy-controlled expanded commercial bank.
The $20-million convertible loan is the first-ever loan facility of the IFC.
In a letter to the PSE, BdO sought the exemption of the loan from the listing rule prohibiting listing of shares "unless rights or public offering is undertaken if the price for the new share will be at a discount higher than 10 percent of the market price or at book value, whichever is higher."
The bank said the 10-percent rule does not apply to a convertible loan.
"It was not designed to cover a bona fide financial transaction," it said. "It was meant to guard against attempts by speculators to take control of a listed entity via a private placement to the detriment of the rest of the shareholders."
The IFC is a special entity created by articles of agreement among various nations, and it can not be considered one of the speculators, which the 10-percent rule was meant to address.
Last May 7, the BdO signed a non-binding letter of intent (LOI) with the IFC for the loan. The IFC under the LOI had the option to convert the loan into common shares.
The IFC has already committed investments of up to $150 million per year in the next three years. One of the preferred sectors that it would take interest in is the financial sector. It had already made investments in the Planters Development Bank, a thrift and savings bank specializing in lending to the small and medium enterprises as well as microfinance. –Ted Torres