DBP plans to raise P7.7 B from Tier-2 issue

The Development Bank of the Philippines (DBP) is planning to raise P7.65 billion in fresh capital from the issuance of Tier-2 notes to help finance its lending programs.

The Bangko Sentral ng Pilipinas (BSP) approved the Tier-2 issuance this week, allowing DBP to issue the notes for its capital-raising exercise which would qualify as lower Tier-2 capital.

DBP had earlier sought and secured the approval of the BSP for the issuance of Tier-2 notes that would have raised a total of P10 billion worth of fresh capital.

However, the bank was only able to use up P2.35 billion when it issued Tier-2 notes in January 2006. The approval for the P10-billion bulk has since lapsed.

BSP sources said DBP is planning to issue the remainder of the notes but had to seek fresh approval from the BSP to be able to do so.

According to sources, DBP’s notes would have a 10-year maturity and the funds raised from the undertaking would beef up its capital, allowing the bank to expand its current operations.

DBP had earlier decided to prepay some of its foreign loans to generate savings from loan facilities that it has not been able to disburse through its lending program.

The BSP earlier reported it allowed DBP to prepay euro2.4 million equivalent to P168 million to Finland-based multilateral development financing organization Nordic Development Fund.

DBP availed of the loan in 1992 but the bank has had a very low utilization rate and BSP sources said it was decided the loans should be retired because they entailed regular commitment fees.

DBP also decided to prepay another 4-billion won loan from the Export-Import Bank of Korea that the bank acquired in 1996, scheduled to mature on July 20, 2015.

Also scheduled for prepayment is another $27.9 million or about P1.25 billion from International Bank for Reconstruction and Development or the World Bank for loans that were granted on Aug. 2, 1989 and April 23, 1993. The loans are scheduled to mature on Aug. 1, 2009 and Aug. 15, 2012, respectively.

According DBP president Reynaldo David, the bank is also prepaying because borrowers have already paid up their loans. He said the funds could not be rolled over for relending because they were set aside for specific purposes.

DBP also this year got the approval from the BSP to take over the Al-Amanah Islamic Investment Bank Of The Philippines.

After complying with regulatory requirements, the BSP approved DBP’s acquisition of 90.6 percent of the country’s only Islamic bank and allowed it to continue performing conventional banking operations for five years.

Under Islamic banking laws, Al Amanah would have to operate as an Islamic bank but the BSP allowed the bank to perform conventional banking for a short period to enable it to establish stronger financial footing.

This provision was originally approved by the BSP to entice private investors to buy into Al Amanah when the National Government put it on the auction block last year.

The BSP said the Monetary Board decided that the DBP should be allowed to benefit from the same perk that would have been available to private investors since it would have to turn the Islamic bank around.