RCBC notes oversubscribed

Rizal Commercial Banking Corp. (RCBC) successfully launched and priced its first capital notes offering yesterday.

The issue size, originally at P4.5 billion, was oversubscribed and issued at P5 billion. The notes were sold to investors at par with an annual coupon of 12 percent.

RCBC chairman Rizalino Navarro said that "RCBC is proud to have launched the first Philippine peso-denominated subordinated bank debt offering in the Philippines. The remarkable investor interest in this offering clearly proves the deep confidence investors have in RCBC. Proceeds of this offering will be used to further expand and strengthen the bank’s operations."

Deutsche Bank is lead arranger and BDO Capital and Investment Corp. and Multinational Investment Bancorporation are co-arrangers for the transaction.

In the meantime, the Securities and Exchange Commission (SEC) has allowed the pre-need trust funds managed by ING Bank and (RCBC) to invest in the issue.

However, the SEC said ING and RCBC may invest only a maximum of 10 percent of the total trust fund of the pre-need companies they manage.

The present rules do not include unsecured subordinated notes as a form of investment outlet for the trust funds.

But the SEC said the instrument being offered by RCBC is an unsecured subordinated debt instrument which is a layer of qualified capital under the General Banking Law of 2000 that lies between the issuer’s common stock, on the one hand, and its deposits and other senior debts, on the other.

The notes are issued in one or more tranches up to a maximum of P5 billion. They carry a fixed interest rate of 12 percent. While the notes have a tenor of 10 years, interest is paid to note holders every six months, thereby providing the pre-need trust funds with additional cash flow to service their liquidity requirements.

The notes will be listed at the Philippine Fixed Income Exchange once this becomes operational. This will provide pre-need trust funds with a secondary market to provide liquidity when necessary.

ING said the 10-year-callable RCBC bond will help in lengthening the duration of the pre-need funds and improve the matching of assets and liabilities of the portfolio.

Bulk of the pre-need funds that ING manages is invested in government securities. ING would like to include some corporate issues into the funds for purposes of portfolio diversification. – Zinnia dela Peña