Manila, Philippines - The country’s biggest bank, BDO Unibank Inc. plans to establish a $2-billion Euro Medium Term Note (EMTN) program, a company official told the Philippine Stock Exchange (PSE).
BDO corporate information officer Elmer Serrano said the issuance of the EMTN would enable the bank to manage its liabilities.
Aside from the EMTN issue, he said BDO also plans to retire P10 billion of its Tier 2 debt by November this year.
“These are part of the bank’s liability management initiatives to tap longer-term funding sources and lower funding costs,” he said.
The EMTN program is a medium-term foreign currency funding facility that will allow BDO the flexibility to issue foreign currency denominated notes, from time to time, in the international capital markets.
Serrano said setting up the EMTN program is a preparatory move on the part of BDO to enhance its ability to access longer-term funding for relending to projects like infrastructure under the government’s Public-Private Partnership (PPP) program.
“BDO likewise plans to exercise the early redemption option on its Series 1 Tier 2 Notes by Nov. 21, 2012,” he added.
Serrano said part of the proceeds from BDO’s recent stock rights offer have already been earmarked for the redemption of these higher-cost notes, which carry a coupon rate of seven percent.
The retirement of the Tier 2 Notes will reduce BDO’s cost of funding as well as improve its capital structure in favor or higher quality core Tier 1 capital.
Recently, BDO raised P43.5 billion (equivalent to over $1 billion) in core capital through a 1:3 rights offer last July 4 to support its medium-term growth objectives and meet the Basel III capital requirements ahead of schedule. Basel III is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk.
BDO earlier said part of the proceeds from the additional capital will be utilized by to exercise its early redemption option on its Tier 2 debt.
BDO is a full-service universal bank that provides a complete array of industry-leading products and services to the retail and corporate markets. Through its subsidiaries, the bank also offers leasing and financing, investment banking, private banking, bancassurance, insurance brokerage, and stock brokerage services.
As the biggest bank in terms of resources, BDO has one of the largest distribution networks, with more than 740 operating branches and over 1,700 ATMs nationwide.