Metrobank’s $130-M bond issue sold out

Metropolitan Bank & Trust Co. (Metrobank) has successfully raised $130 million yesterday in the international capital markets with a 10-year Lower Tier 2 bond issue. The bonds have been listed in Singapore and will pay a semi-annual coupon of 8.375 percent. The sub-debt issue was rated at the Philippine sovereign rating of Ba1 by Moody’s.

The proceeds of the bond issue will be used to refinance Metrobank’s existing $100-million Tier 2 private placement issued in 2001, which paid a nine-percent coupon. Metrobank originally intended to issue only $100 million for refinancing purposes but decided to upsize the amount to $130 million after the overwhelming demand – more than 2x subscribed without the need for a roadshow.

"The transaction was remarkable allowing us significant cost savings by refinancing with a lower coupon and enhanced capital by extending the maturity of our Tier 2," said Metrobank president Antonio Abacan. "The deal was executed in a short timetable without a roadshow. Investors know us well and didn’t require a face-to-face roadshow," Metrobank’s chief financial officer Alfredo Javellana added.

Over 60 percent of the demand came from international institutional investors from Singapore, Hong Kong, Europe, and Australia. Among the 43 accounts that were allocated bonds, 48 percent were private banks, 34 percent were banks, 14 percent were asset managers, and the rest were insurance companies. Many of these investors also supported Metrobank’s first international issue in 2002. The 10-year bond issue, which is callable on the fifth year, was tightly priced at 8,625 percent which is the same spread over US Treasuries as the existing 2002 issue.

The oversubscription was notable given that Moody’s Rating Services revised the Philippines’ long term foreign currency debt outlook to negative from stable as result of "heightened political uncertainty" and concerns over the budget deficit. This revised forecast caused spreads on Philippine sovereign bonds to widen and the Philippine Stock Exchange index to closer lower.

Metrobank’s new issue is the first from the Philippines in the international capital markets since the July mutiny and the political issues that followed. Metrobank was the first Philippine bank issue of Tier 2 capital in the international capital market with its issuance in Nov. 2002.