Landbank plans up to $150-million Tier 1 debt issue

MANILA, Philippines - State-run Land Bank of the Philippines is planning to raise up to $150 million through a hybrid Tier 1 debt issue to beef up its loan portfolio for lending to priority sectors.

Landbank executive vice president for institutional banking and subsidiaries sector Cecille Borromeo said the capital raising exercise could be undertaken in the last quarter of the year or the first quarter of 2010, depending on the direction of interest rates.

“We will move before interest rates start rising (next year),” she pointed out.

The government financing institution is looking to boost its lending portfolio by at least 10 percent from P184.7 billion as of end-2008. By the first quarter of 2009, its total loans reached P185.1 billion, up 43 percent from the previous year.

Early this year, Landbank raised P6.9 billion in fresh capital through an unsecured subordinated notes issue. The float was initially valued at P3 billion but strong demand forced the bank to go for the maximum amount allowed by the Bangko Sentral ng Pilipinas (BSP).

The notes carried a coupon rate of 7.25 percent per annum, or 75 basis points above the benchmark rate.

The P6.9-billion Tier 2 deal served as supplemental capital which, in turn, raised Landbank’s capital adequacy ratio (CAR) from 14.9 percent in 2008 to 17.3 percent this year.