GOVERNMENT-owned bank Development Bank of the Philippines (DBP) announced it has already met its target of P3 billion for its Aug. 19-27, 2008 offering of unsecured subordinated notes.
DBP president and chief executive officer Reynaldo David said that based on applications to purchase, the state-owned bank’s target for the notes, which are eligible as Lower Tier 2 capital due in 2013, has been met last ahead of time.
David, who was in Cebu last Thursday to launch the unsecured subordinated notes offering, said the applications to purchase even went beyond P3 billlion. He said some applications came from groups or persons in Cebu Province.
Ma. Theresa Quirino, DBP executive vice president, said, though, that the DBP will continue to accept orders until the official closing date of the offering on Aug. 27.
Even if the minimum allocation of P3 billion is already met, she said it is possible for DBP to upsize the public offering to
P7.6 billion since this is the amount that the bank had applied with the Bangko Sentral ng Pilipinas (BSP). But this decision is yet to be made, she added.
The notes are intended to provide DBP additional Tier 2 capital to fund its various business initiatives and development lending.
Although the notes are considered “unsecured,” as there is no guarantee implied in the terms of the investment, Quirino is
confident that the DBP will not default.
No default
“The government will not allow that (default) to happen,” she said. She also mentioned that DBP has a number of funding
from Official Development Assistance (ODA) loans with cross-default provisions.
With the initial reaction to DBP’s second offering—the first was in 2006 when DBP was able to raise P2.4 billion—the bank is confident it will be able to secure P7.6 billion more in its future, but still unscheduled, offerings to further expand its capital base.
“This is also a way for the bank to offer an alternative investment tool to our clients,” David said in his presentation. He added that through investing in unsecured subordinated notes, Filipino investors can take part in nation-building.
Under the terms of the investment, the minimum outlay is P500,000 with additional denominations at P100,000. The notes will mature in 10 years with an optional redemption on the fifth year.
The initial interest rate is fixed at the current 7.92 percent for the first five years and will increase, according to a DBP-set formula, on the sixth year. The issue date for the notes is on Sept. 1, 2008.
Lynette Ortiz, head of the capital markets department of the Hong Kong and Shanghai Banking Corp. (HSBC), said the public offer period of the notes is only until Aug.t 27, 2008.
The investment is not supported by the Philippine Deposit Insurance Corp. while tax exemption is extended to individual investors and tax-exempt institutions only.
DBP had appointed Deutsche Bank, First Metro Investment Corp. and HSBC as joint lead managers for the issuance. (DME)
