Moodys retains stable outlook for Banco de Oro
January 15, 2004 | 12:00am
Moodys Investors Service has affirmed its rating of the financial strength of Banco de Oro Universal Bank with stable outlooks following its acquisition of a 29-percent share of Equitable PCI Bank.
Moodys said it is retaining its D-bank financial strength rating and D-bank financial strength rating of Equitable PCI Bank, indicating that the rating agencys belief that the transaction is unlikely to have a significant impact on either banks financial fundamentals.
However, Moodys said it is unclear whether further Corporate actions with potential rating implications could arise from this transaction over the longer term.
Moodys analyst John Tham said yesterday that the credit ratings of Banco de Oro and Equitable PCI were both currently on review for possible downgrade together with the Philippines sovereign ratings but the review did not reflect bank-specific issues.
Banco de Oro will buy a 25.8-percent equity stake in Equitable PCI from the Social Security System. The deal, valued at P14 billion, would involve an initial cash outlay of P1 billion. The balance of P13 billion would be paid in the form of a 6.5-year zero-coupon bond, with the expectation that this debt would be refinanced with more permanent capital in the near future.
"Moodys expects the financially sound Banco de Oro to weather the cost of the transaction, given the relatively small cash outlay involved, and its access to funding from committed major shareholders as well as the capital market," Tham pointed out. "The realization of synergies between the banks is unlikely in the near term given the autonomous operations of the two banks."
Tham said Banco de Oro is the Philippines ninth largest bank by assets, with assets of P135.2 billion as of Sept. 19, 2003. On the other hand, Equitable-PCI Bank is the countrys third largest lender, with reported assets of P288.2 billion as of Sept. 19, 2003. Des Ferriols
Moodys said it is retaining its D-bank financial strength rating and D-bank financial strength rating of Equitable PCI Bank, indicating that the rating agencys belief that the transaction is unlikely to have a significant impact on either banks financial fundamentals.
However, Moodys said it is unclear whether further Corporate actions with potential rating implications could arise from this transaction over the longer term.
Moodys analyst John Tham said yesterday that the credit ratings of Banco de Oro and Equitable PCI were both currently on review for possible downgrade together with the Philippines sovereign ratings but the review did not reflect bank-specific issues.
Banco de Oro will buy a 25.8-percent equity stake in Equitable PCI from the Social Security System. The deal, valued at P14 billion, would involve an initial cash outlay of P1 billion. The balance of P13 billion would be paid in the form of a 6.5-year zero-coupon bond, with the expectation that this debt would be refinanced with more permanent capital in the near future.
"Moodys expects the financially sound Banco de Oro to weather the cost of the transaction, given the relatively small cash outlay involved, and its access to funding from committed major shareholders as well as the capital market," Tham pointed out. "The realization of synergies between the banks is unlikely in the near term given the autonomous operations of the two banks."
Tham said Banco de Oro is the Philippines ninth largest bank by assets, with assets of P135.2 billion as of Sept. 19, 2003. On the other hand, Equitable-PCI Bank is the countrys third largest lender, with reported assets of P288.2 billion as of Sept. 19, 2003. Des Ferriols
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