RCBC taps Citibank, Deutsche Bank for hybrid Tier I debt instrument

The Rizal Commercial Banking Corp. (RCBC) has tapped Citibank NA and Deutsche Bank as lead manager for its $100-million hybrid Tier 1 debt instrument issue.

The Yuchengco-led commercial bank is reportedly looking at September for its roadshow. However, the roadshow date was actually tentative placing interest rates as the principal condition.

Bank officials who asked not to be named said that rates were still moving uncomfortably upwards. In fact, the United States Federal Reserve (US Fed) is expected to increase rates by another 25 basis points.

Higher interest rates will make the cost of offshore borrowings costly. The same bank official said that timing the float properly is important or when rates are stable.

Incidentally, Credit Swiss First Boston, ABN Amro and Lehman Brothers also submitted proposals for the $100-million capital-raising activity.

Meanwhile, RCBC will issue as scheduled its P1-billion worth of perpetual but non-cumulative preferred shares. The move was said to improve the total amount that the bank could float for its hybrid instruments.

The two capital-raising activity would increase RCBC’s capital adequacy ratio (CAR) to over 16 percent from 14 percent as well as provide the bank certain flexibility in "leveraging" up to seven times its present capital base.

The Bangko Sentral ng Pilipinas (BSP) has ruled that banks going hybrid tier 1 capital to beef-up its finance can issue 50 percent of its tier 2 capital, which meant that RCBC can issue as much as P500 million worth of hybrid tier 1 debt instruments based on its P1 billion tier 2 planned issue.

Earlier this year, RCBC officials said that it wanted to raise up to P5-billion additional capital to meet the requirements of regulators as well as expansion plans.

The amount will come from the issuance of preferred shares, the sale of non-performing assets (NPAs) with the help of the Special Purpose Vehicle Law (SPV Law), public auctions of real and other properties acquired (ROPA), and the entry of new partners.

RCBC vice chairman Cesar EA Virata in an interview said the P5-billion fresh funds will likely be broken down in P1 billion from the issuance of preferred shares, between P2- to P3-billion sale of NPAs, and possibly P1 to P2 billion from new investments.

The P1-billion worth of preferred shares have already been approved by the regulators. The RCBC board issued non-voting, non-cumulative, convertible, non-redeemable, and participating preferred shares with a par value of P10 per share. – Ted Torres