The plan required a major test of stamina for our team of five. We had to hit Singapore, Hong Kong and London in three days. In each city, we had to brief eight groups of investors through the length of each day, flying in late at night, then doing a run-through of the prospective investors and flying off the next evening to see the next group of investors.
We left Manila Tuesday night last week, not without some amount of apprehension. It was apprehension akin to throwing a party and wondering if the guests would show up. We were really not sure how the global market will respond to our offering.
The DBP is the first public financial institution – and only the second Philippine bank, to offer Tier 1 hybrid capital notes to the global investment community. I will not go through the technical details of what this type of security is. Suffice it to say that the BSP allowed us to market $130 million of this issue. It is a perpetual note that can later be bought and sold in the open market at a price determined by the Bank’s financial performance. The proceeds from the sale go into the capital stock of the DBP, allowing this institution to expand its capacity to finance development projects – major infrastructure and alternative energy programs particularly.
There is much riding on this mission besides raising the capital stock of the Bank. It would be a major barometer of how the global investment community perceives the prospects not only of the DBP but of the entire Philippine economy. The level at which this issue is priced by the global investment market will be a benchmark for other Philippine corporations, public or private.
The repercussions of the final outcome of this investment offering weighed heavily in our minds.
There were many things going in our favor, however. This is why we timed our investment roadshow when we did.
The DBP is today the highest rated Philippine bank. No public institution or private corporation can have a credit rating higher than the sovereign rating of the Philippines (which explains why improving the country’s credit rating is important to the health of our businesses). The DBP currently enjoys sovereign rating given all the standard measures of efficiency, stability and profitability. The Bank has a clear credit policy and an impressive record of corporate governance.
The country is back on the radar screens of global investors. The peso is strong. The fiscal outlook is positive. Our international reserves are at record levels. Economic management by this administration is sound.
Our politicians may whine all the time and the noisy but inept opposition may try to peddle doom and gloom scenarios day in and day out. But at the end of the day, what matters is the assessment of people who put their money where their mouths are.
Our briefing team expected we would be grilled on the numbers – not only the DBP’s numbers (which are solid) but the country’s numbers as well (which are impressive). Many policy and political questions will be asked and we prepared our team to deal with every possible investor concern.
Our first day, in Singapore, did see many questions asked. But the attitude of the investors was perceptibly positive.
By the time we began our second day of briefing in Hong Kong, our underwriter banks reported that investment bookings for our issue had surpassed target. By the end of the second day, our issue was 14 times oversubscribed.
We wanted to raise $130 million. By the afternoon of the second day, we had over $1.9 billion in booked orders. A veritable tidal wave of investor interest greeted our issue. Our underwriters say that to their knowledge this is the most impressive reception for an issue of this sort.
As we were on our way to London on the second night of our roadshow, our underwriters in Hongkong decided to close the bookings. We simply cannot satisfy the demand.
As soon as we landed in Hong Kong, we revised all the remaining schedules and began negotiations in the morning for pricing the issue. By noon, we had reached a satisfactory price for the issue and promptly closed the deal four days ahead of schedule.
Earlier this year, Metrobank pioneered in selling Tier 1 capital notes in the global market. Their issue was priced at 9% interest rate.
We would have been happy to price ours at 8.75%. But because of the overwhelming investor interest, we were able to price it down to 8.375%. That was beyond our best expectation. It would be a benchmark that other Philippine issuers will benefit from.
This was a moment of great pride and joy for the institution and for the country.
Sad news
While in London, relishing our triumph, we received truly sad news from home: our beloved Ricardo "Toy" Nepomuceno had passed away.
Toy served on the Board of Directors for five years, until he was recently replaced. While he was director, this great legal mind was a source of much insight and wisdom in the complex matters we sort out as a matter of course. So reassuring was his presence that we felt naked without his advice. Our CEO Rey David begged him to stay on in a new capacity as legal advisor to the Board. He was on his way to work when he was felled by a stroke.
Toy is a true patriot, a respected legal luminary, a dedicated public servant, an uncompromising democrat, a wonderful person and a dear friend. He was active in the anti-Marcos resistance, helping organize Bandila. He led the private prosecutors in the impeachment of Joseph Estrada. He served in various capacities in private corporations and public agencies. To his last day, he was helping in the prosecution of the plunder case against Estrada.
Although he was much older than I am, we became very good friends. I am an admirer of his brilliance, his wit and his constant sense of humor. I cherish that friendship and deeply mourn his passing.