BDO sets $20-M bond offer

The Henry Sy-owned Banco de Oro has scheduled its $20-million bond offer this month, a transaction that would give the International Finance Corp. (IFC) at least 10- percent equity in the bank should it convert the bonds in two years.

BDO president Nestor Tan told reporters over the weekend that the bank is all set to undertake the so-called Tier 2 offer which would be wholly taken up by IFC, the investment arm of the World Bank.

The proceeds of the bond offer will be used by BDO as Tier 2 capital, to be convertible directly into equity within two years. Following its acquisition of First e-Bank last year, BDO now needs additional capital to finance its expansion plans.

BDO's Tier 2 offer was approved late last year by the Bangko Sentral ng Pilipinas (BSP), as well as its merger with First e-Bank. The BSP also granted incentives that include liberal bank branching terms and higher valuation and staggered capital build-up.

The "integration" was approved by the Monetary Board after Banco de Oro (BDO) and First e-Bank reached an agreement where BDO agreed to take over P10 billion of deposits, liabilities and other assets of First e-Bank.

BDO is owned by retail magnate Henry Sy, while FeB is a subsidiary of the Metro Pacific Corp. The agreement concluded months of negotiations between the two banks where BDO would be the surviving entity.

The BSP said that BDO would be entitled to the incentives granted to merging banks, although the transaction was officially a hybrid merger that fell under the category of "integration."

BSP Deputy Governor Alberto Reyes Jr. told reporters that the MB approved the integration and granted BDO the incentives that would allow the bank to relocate its branches.

"If they are relocating any branch within the Metro Manila area, they only need to pay the usual fee of P1 million," Reyes said.

The merger would increase BDO's customer base by an estimated 80,000 depositors and its network by a total of 57 branches, Reyes said.

First e-Bank has failed to make a profit since 1998, making it a prime candidate for takeover by larger banks. Despite its dismal performance, the bank has the primary attraction of being a listed bank. – Des Ferriols