Metrobank’s Tier 2 notes gobbled up

The lower Tier 2 peso-denominated step-up callable subordinated notes issue worth at least P5 billion by Metropolitan Bank and Trust Co. (Metrobank) was oversubscribed, a top bank official said.

“The P5 billion target issuance which closed Oct. 12 had already received applications reaching P10 billion,” Metrobank executive vice president Fernand Antonio Tansingco said in a statement.

The country’s biggest bank has the option to increase the issue up to P10 billion based on its approved application with the Bangko Sentral ng Pilipinas (BSP).

The offer was launched to replace the $125-million subordinated notes due 2012, which Metrobank is redeeming, and to strengthen its capital base especially under new Basel 2 capital adequacy regulations.

This issue represents a series of firsts in the local financial markets – the largest peso denominated lower Tier 2 issue ever, the lowest spread against benchmark at 29 basis points, and the highest credit rating for a Philippine peso Tier 2 issue given by Moody’s Investor Services.

Moody’s Investors Service assigned a Baa3 rating to the issue.

ING Bank and Standard Chartered Bank were the joint lead arrangers, bookrunners, selling agents and market-makers for the issue. Multinational Investment Bank Corp. is one of the selling agents while Metrobank and affiliate First Metro Investment Corp. were limited selling agents.

Last year, Metrobank engaged in a series of Tier 1 and primary shares issuances amounting to over P12 billion to boost its capital in anticipation of Basel 2 regulations.

The outstanding long-term foreign currency debts of Metrobank was likewise upgraded from ‘BB minus’ to ‘BB’ with a stable outlook by Fitch Ratings.

Credit ratings are indicators of a financial institution’s credit worthiness.

The ratings agency underscored Metrobank’s improving balance sheet strength and underlying profitability, together with leadership advantages, as the reasons for the upgrade.

The commercial bank’s $125-million Tier 1 subordinated notes was likewise upgraded to ‘B’ from ‘B minus’, with the outstanding short-term foreign currency debts affirmed at ‘B’, individual rating at ‘D’, support rating at ‘3’, and support rating floor at ‘BB minus’.

Metrobank has collateralized debt obligations (CDO) portfolio composed of investment grade tranches, which turned in a healthy performance despite the turmoil in the US subprime market. The CDOs are backed by investment grade underlying credits. The portfolio is reviewed monthly by international credit rating agencies for impairment or deterioration of credit quality.