PNB redeems P5.5-B notes

Manila, Philippines - Philippine National Bank (PNB) has decided to redeem P5.5 billion worth of unsecured and unsubordinated notes it had issued in August 2006.

In a report, the commercial bank majority controlled by taipan Lucio Tan said it would exercise its call option “by paying the noteholders the face value of the notes plus accrued interest.”

The redemption of the P5.5-billion notes comes weeks after the bank raised P6.5 billion worth of notes classified as Lower Tier 2 capital in the market.

The notes will pay an interest of 6.75 percent with maturity date in 2021. The bank can exercise a call option after five years.

The notes issue also marks the first tranch to issue P10 billion worth of unsecured subordinated debt qualifying as Lower Tier 2 capital. PNB has until the first quarter of 2012 to issue the second tranche worth P3.5 billion.

The total amount raised will be used to build up PNB’s branch and automated teller machine (ATM) network. It will also serve as seed money in the event that its much-delayed merger with Allied Banking Corp. pushes through.

As early as 2008, the respective boards of both PNB and Allied Bank approved a merger plan with PNB as the surviving entity. But the process faced several roadblocks, one of which is the delay in regulatory approval as US monetary authorities wanted Allied Bank to divest its holding of California-based Oceanic Bank, where it holds a 28-percent stake.

Due to the unfavorable economic conditions in the US, there were still no takers for the 28-percent stake, thus delaying the merger process anew.

For the meantime, the two banks have started integrating operations such as rationalizing the positioning of their respective branches. In fact, there had also been swaps of executives with the end in view of a smooth transition into one entity.

“The additional capital will ensure that the capital base of the merged bank meets domestic and international regulatory standards,” PNB executives said.