Gov't banks to float bonds overseas

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Gov't banks to float bonds overseas
Posted: 4:32 AM | Mar. 22, 2006
Doris C. Dumlao
Inquirer

STATE-OWNED Development Bank of the Philippines (DBP) and Land Bank of the Philippines are planning to enter the offshore bond market to raise $230-$280 million, top officials of the banks said.

DBP intends to sell in April or May $130 million in hybrid instruments eligible as core, or tier 1, capital in the computation of capital adequacy ratios. This is the first time DBP will venture into the foreign capital market.

Land Bank plans to issue $100 million to $150 million worth of bonds for its supplementary, or tier 2, capital during the same period. This will be its first attempt in nine years to borrow from overseas markets.

Their charters restrict two government banks' capital-raising activities. The overseas bond sales would let them meet stricter requirements under the new International Accounting Standards and Basle 2 capital adequacy framework.

DBP president Reynaldo David said US-based global rating agency Standard & Poor's was doing a due-diligence audit on the bank to rate its proposed hybrid bond float.

The offering, to be arranged by Barclays and Deutsche Bank, is still awaiting approval of the central bank and Department of Finance, he said.

Hybrid tier 1 capital instruments have equity-like features that make them acceptable as tier 1 capital. They may be in the form of unsecured subordinated debt or preferred shares with step-up feature.

This and its planned domestic fund-raising activity would raise DBP's capital adequacy ratio to 38 percent from 25 percent, David said.

The Department of Finance has approved Land Bank's plan to issue up to $150 million worth of subordinated debt maturing in five years.

"They removed the guarantees, and we want it that way because we want it as tier 2 capital," Land Bank president Gilda Pico said.

The bond issue will raise Land Bank's capital adequacy ratio to 17 percent from the present 12.8 percent.

Land Bank has mandated Deutsche Bank to manage its tier-2 issue.

Land Bank is the country's third biggest bank in assets (P310.45 billion) as of end-2005. DBP ranks seventh with assets of P210.6 billion. With INQ7.net