Moody’s assigns Ba1 to Equitable PCI notes

SINGAPORE – Moody’s Investors Service assigned a prospective rating of Ba1 to Equitable-PCI Bank’s (EPCI’s) proposed $100-$130-million subordinated note due 2012. The outlook on the rating is stable. The rating reflects EPCI’s status as the Philippines’ third largest indigenous bank, with an expansive branch network and a well-established mid-market franchise.

Moody’s believes that the bank would receive strong regulatory support if needed, given its systemic importance.

Indeed, EPCI received prompt support through a liquidity loan from Bangko Sentral ng Pilipinas (BSP) in January 2001, which was fully repaid as of December 2001.

Incorporated also in the rating are challenges EPCI faces in rebuilding its franchise in a difficult environment, and the risks associated with the issue’s structural subordination to senior bank obligations.

Given the bank’s stabilizing but still weak financial condition, developments that could change the government’s attitude toward support would pressure the rating, in Moody’s opinion.

Despite the proposed notes’ subordinated status, the issue was rated above the bank’s deposits, which are constrained by the country’s foreign currency deposit ceiling.

Moody’s believes that the risk associated with the issue’s subordination is mitigated by EPCI’s systemic importance, which lowers the likelihood that it will face regulatory intervention that could potentially cause credit losses to the noteholders.

The prospective rating of Ba1 on EPCI’s proposed subordinated notes was assigned on condition that no material changes are made to the terms and conditions of the notes reviewed.

The proposed issue, due 2012, has a fixed interest rate reset feature, and is callable (with BSP’s approval) in 2007.

The existing ratings of Equitable-PCI Bank are: long-term/short-term deposit of Ba2/Not Prime and bank financial strength rating of D-.

Equitable-PCI Bank, incorporated in the Philippines, reported total assets of P253.8 billion at the end of September 2002. The bank was formed in September 1999 when Equitable Banking Corp. (EBC) acquired Philippine Commercial International Bank (PCIB).