Metrobank’s $100-M bond float gets SEC okay

Metropolitan Bank and Trust Co has been given the green light by the Bangko Sentral ng Pilipinas (BSP) to proceed with its planned $100-million bond float intended to support its nertwork expansion.

BSP Governor Rafael Buenaventura told reporters that the Monetary Board has approved Metrobank’s plan to float the bonds and boost its tier 2 capital.

Banks that want to increase their capital without diluting existing shareholders are allowed to boost their so-called tier 2 capital by issuing quasi-debt instruments typically denominated in dollars.

The BSP has been encouraging local banks to raise their equity to offset the decline in capital caused by increasing bad loans. Raising tier 2 capital is one of the most favorable alternative equity-rasing schemes since very few investors that already hold interest in banks have the capacity to infuse more cash into them.

For this float, Metrobank was reported to have hired UBS Warburg to lead the $100 to $150-million 10-year subordinated bond deal which would be non-callable for five years.

Metrobank has already scheduled roadshows to drum up interest among investors in Manila, Singapore, Hong Kong and London.

Metrobank, the country’s largest bank, raised its tier 2 capital last year by selling $100 million worth of five-year convertible notes through a private placement to Singapore-based Dunmore Asset Ltd.

In the past, foreign investors that want to invest in local banks had to convert their dollar investments into pesos in order to do so. The tier 2 scheme allows them to make their investment in dollars instead of possibly taking a hit due to currency fluctuation.

So far, only Metrobank has managed to raise tier 2 capital although several other smaller banks have laid out similar plans.

Last June, Equitable PCI Bank said it was planning to raise P5 billion in tier 2 capital from a notes offering while Banco de Oro said it was planning to tap a $20-million five-year loan from the International Finance Corp. (IFC) of the World Bank.

Philippine banks have been wrestling with stubbornly high non-performing loans that averaged 17.58 percent of total loan portfolio at the end of August.

Metrobank’s NPL ratio as of Sept. 20 was 12.55 percent of total loans, while Equitable PCI Bank’s was 18.43 percent.