BDO raises $1B from rights offer

MANILA, Philippines - BDO Unibank Inc. has raised P43.5 billion (approximately $1 billion), considered the largest ever equity markets transaction by a Philippine issuer.

The rights offer, numbering 895,218,832 shares, strengthens BDO’s common equity Tier 1 capital and makes it the largest capitalized in the country at P143 billion.

Its Tier 1 ratio makes it the leading Philippines bank in that category, and only second to Singapore’s OCBC among Asean private banks.

OCBC reflected a 14.4-percent Tier 1 capital ratio, while BDO hit 13.4 percent with the recent rights offer. Indonesia’s Bank Mandiri reflected a 13.1 percent ratio followed by Bangkok Bank of Thailand (12.2 percent) and CIMB of Malaysia (11.3 percent).

The rights offer, which gives BDO a total of 3,580,875,328 issued and outstanding common shares, provides a comfortable buffer to the more stringent Basel III capital requirements expected to be implemented by the BSP.

Under the Basel III capital framework, the BSP will be raising the capital adequacy ratio (CAR) from the present 10 percent to 12.5 percent, as well as doubling of the Tier 1 ratio from five to 10 percent starting January 2014.

BDO president and chief executive officer Nestor V. Tan said that the stock rights offer raised necessary capital to fund expanding loans, which formed part of its 2012 outlook.

“It (rights offer) is the most equitable form of capital raising as it allows all shareholders to particiapate,” Tan added.

BDO believes the offer has better positioned it to fulfill its medium-term growth objectives and take advantage of the positive outlook on the Philippine economy.

Tan likewise pointed out that the huge capital buffer would allow the commercial bank of the SM Group enough fodder entering the Asean integration period.

The Asean Free Trade Agreement (AFTA) takes full effect in 2015, which will result in tougher competition but more opportunities.

Meanwhile, the offer was oversubscribed, with shareholders applying for shares beyond their entitlement. It also experienced strong participation from domestic and international investors.

Citi, Deutsche Bank and J.P.Morgan served as joint international lead managers and international underwriters. The United Overseas Bank Ltd. (UOB) acted as international co-lead manager and international co-lcead underwriter, while BDO Capital & Investment Corp. was issue manager and domestic underwriter.

Last year, BDO also raised P6.5 billion worth of peso-denominated unsecured subordinated notes qualifying as Tier 2 capital, which was oversubscribed as the original offer was for just P3 billion for both retail and institutional investors.

That forced BDO to upsize the issue from the original offer size and shortened the offering period due to oversubscription.

In June 2011, the bank also issued Tier 2 capital notes worth P8.5 billion. The original target was to raise P5 billion but it was swamped with strong demand that it ballooned to P8.5 billion.

Both Tier 2 offers were part of BDO’s P15-billion program, designed to supplement the bank’s capital position, aside from fuel its expansion.