PNB to refinance P10.5-B debts with LTNCD offer in Q3

MANILA, Philippines - Lucio Tan-led Philippine National Bank (PNB) is planning to refinance the early redemption of its debts totaling P10.5 billion, beginning with a planned P5-billion offer next quarter, officials said yesterday.

“We are still awaiting approval from the central bank for P5 billion worth of LTNCDs (Long Term Negotiable Certificate of Deposit),” PNB president and chief executive officer Omar Byron Mier told reporters in a briefing.

LTNCDs are just like time deposits, except that they cannot be pre-terminated. Mier said the bank, if permitted, will be issuing the 5.5-year papers “within 30 to 60 days.”

“If the central bank allows this one, then we will issue another P5 billion afterwards,” he added.

The move comes after PNB announced on May 8 it will exercise its call option in P6 billion worth of 10-year unsecured subordinated notes by June 20.

The process involves the early redemption of securities by paying the face value of the debt papers plus accrued interest. The notes carry a coupon rate of 8.5 percent.

Call options are exercised to take advantage of the low interest environment. In this instance, the 8.5-percent interest is much higher compared with the prevailing policy rate of 3.5 percent.

Before this, Horacio Cebrero III, executive vice-president for Treasury Group, said PNB also shouldered the call option for P4 billion worth of debts for Allied Banking Corp., following the two banks’ merger.

“We want to cover both the needs of the investors and the bank,” Cebrero told reporters on the sidelines of the briefing.

LTNCDs, he said, offer higher yields compared to 30-day deposits while at the same time, the cost for the bank is “fair.” The ban on investment placements on special deposit accounts (SDA) also came at the most opportune time.

The Bangko Sentral ng Pilipinas (BSP) has ordered lenders to wind off singular investment management accounts parked on the SDA by Nov. 30, or else face penalties.

As for plans to raise capital, Mier said this is being “studied” and “analyzed,” but declined to go on specifics. “The strategy for the next three years is for a bigger, better and stronger PNB,” he said.

PNB, the country’s fifth largest in asset terms, booked a net income of P2.62 billion in the first quarter, up 112 percent from previous year’s P1.24 billion. The lender targets to boost profits by 15 percent per annum over the next five years.