In a disclosure to the Philippine Stock Exchange, BDO said the loan agreement was the same facility both parties agreed on last July, but has to first secure the approval of the Bangko Sentral’s Monetary Board "because it involves foreign borrowing that has to be registered in compliance with BSP regulations."
BDO also said the convertible loan is qualified as a Tier 2 capital under the BSP’s program allowing banks to augment their capital base through the use of quasi-equity funds.
Under the terms of the convertible loan, IFC will extend the loan over a five-year period at a substantially reduced interest rate, with the option to convert the same into new common shares of the bank beginning the third year from disbursement.
Combined, the conversion price and the interest benefit yields an effective conversion price of as low as P18.49 per share to as high as P21.17 per share, depending on when IFC will exercise its option to convert the loan into equity .
Last May, BDO raised P864 million in net proceeds from the initial public offering (IPO) of the 10 percent of its outstanding capital stock, priced at P20.80 per share.
But BDO said since the interest rate of the IFC loan is significantly lower than the bank’s current average cost of amounts to a lower P16.70 per share.
If IFC opts to convert the loan into equity, it would be entitled to a seat or an observer status in the bank’s 11-man board.
BDO said aside from the substantialy low interest charges, the convertible loan with IFC will benefit the bank as IFC’s entry will raise its global standards for professional management and secure a seal of good housekeeping with the attachment of a large global multilateral agency.
Moreover, BDO said it would make available a co-guaranty facility with IFC for qualified credits and enable the transfer of technology and management systems plus related trainings with its partnership with IFC.
With the exception of the controlling SM group of taipan Henry Sy, BDO has a foreign partner in Dao Heng Bank Ltd., a wholly-owned subsidiary of the Hong Kong-based Dao Heng Bank Group Ltd.
On Sept. 25, BDO signed an agreement with First e-Bank of the Metro Pacific Group wherein it will assume the banking activities of the latter, pushing BDO’s resource base into the top 10 list of banks in the country.
Under the deal, BDO will assume the banking business of FSTE, thereby increasing its deposit base by about P10 billion and its customers by around 80,000, mostly from small and medium-scale enterprises, scattered in 57-well-distributed branches.
Late last October, BDO started taking over of the operations of FSTE, in the process assuming P10-billion worth of assets and liabilities, the bulk of which is in the form of deposit liabilities valued at P8.9 billion.
In the first nine months of 2002, BDO registered an unaudited net income of P772.1 million, which was more than double last year’s comparative period profit of P353.3 million and surpassing its target of P717 million.