BdO vice president Edith Dee-Dychiao said the notes would be used to finance a number of huge loans made by its corporate clients. "It is necessary to plug a particular funding gap of new corporate accounts as there is a growing demand for medium- to long-term lending," she pointed out.
The $100 million, five-year term notes were originally scheduled for launching last July but the bank decided to postpone it as the global bond market weakened
However, Dychiao stressed the exercise was not a Tier 2 capital undertaking. BdO already secured a $20-million convertible loan from the International Finance Corp. (IFC), the investment arm of the World Bank. It will be used as additional capital for its branch expansion and loan portfolio.
BdO, the commercial banking arm of the SM Group, also undertook recently a three-year risk sharing facility with the IFC worth $62.5 million, which would enable the bank to extend risk-free medium and long-term loans.
Under the agreement, the IFC would partially share the credit risk of selected new loans originated by BdO. However, the maximum risk for the IFC will only be as high as its equity exposure to the bank.
BdO wants a diverse portfolio for funding sources for its corporate and expansion programs. Its corporate lending portfolio is likewise a mix of short-, medium- and long-term funding.
At the start of the second half of 2003, BdO acquired high-end financial institution Banco Santander Philippines Inc. (BSPI) for P2.56 billion, along with the brokerage arm of the Santander Group for P28.4 million. – Ted Torres