Under the terms of the convertible loan, IFC will extend the loan over a five-year period at a substantially reduced interest rate, with the option to convert the same into new common shares of the bank beginning the third year from disbursement.
Combined, the conversion price and the interest benefit yields an effective conversion price of as low as P18.49 per share to as high as P21.17 per share, depending on when IFC exercises its option to convert the loan into equity.
BDO earlier raised P864 million in net proceeds from the initial public offering (IPO) of 10 percent of its outstanding capital stock, priced at P20.80 per share.
BDO said since the interest rate of the IFC loan is significantly lower than the bank’s current average cost of money, the nominal conversion price under the agreement amounts to a lower P16.70 per share.
If IFC opts to convert the loan into equity, it would be entitled to a seat or an observer status in the bank’s 11-man board.
BDO said aside from the substantially low interest charges, the convertible loan with IFC will benefit the bank as IFC’s entry will raise its global standards for professional management and secure a seal of good housekeeping with the attachment of a large global multi-lateral agency.
Moreover, BDO said it would make available a co-guaranty facility with IFC for qualified credits and enable the transfer of technology and management systems plus related trainings with its partnership with IFC.
With the exception of the controlling SM Group of taipan Henry Sy, BDO has a foreign partner in Dao Heng Bank Ltd., a wholly-owned subsidiary of the Hong Kong-based Dao Heng Bank Group Ltd.