BDO to raise $1B via rights offer; largest to date

Posted at 04/02/12 4:53 PM

MANILA, Philippines - BDO Unibank, Inc. on Monday said it is raising $1 billion to shore up its core capital via a rights offering, the biggest fund-raising activity so far for the Sy-led bank.

In a disclosure to the stock exchange, the bank said the fund raising activity is meant to prepare for the more stringent requirements of the BASEL III capital guidelines and to support medium-term growth plans.

A rights issue is offered to existing shareholders to buy a proportional number of additional securities at a usually discounted price within a fixed period.

"This capital raising is intended to support the growth and expansion of the bank amidst the positive sentiments on the economy and at the same time strengthen the bank's capital position in anticipation of new Basel III requirements," BDO Chair Teresita T. Sy said, in a statement.

At present, BDO's consolidated CAR and Tier 1 ratios are at 15.6% and 10.2%, respectively. The BSP proposed a minimum capital adequacy ratio (CAR) of 12.5% from 10%, and a doubling of the Tier 1 ratio to 10% effective January 2014.

"The new capital will provide a sufficient buffer on top of the new minimum capital levels and allow BDO to sustain its growth momentum. The bank is optimistic about the outlook on the Philippine economy and hopes to continue with its faster-than-industry loan growth, driven by a strong consumer sector and opportunities in the SME, middle market and large corporate segments," BDO said.

BDO said the approximately 1:3 rights offer will be offered at an indicative discount of 20%-25% to market to allow all shareholders to proportionally participate in the capital-raising program.

BDO's strategic investors, SM Investments Corp. (SMIC), the International Finance Corp. and United Overseas Bank, have expressed their support for the bank's expansion and the proposed rights offer.

SMIC has committed to subscribe to its proportionate share and is willing to underwrite the shares not taken up by the minority shareholders.

Details on the proposed pricing, rights ratio and timetable will be disclosed once finalized.

The Sy-owned bank is the country's largest in terms of assets, deposits, total resources and loans. Last year, the bank's net profit hit P10.5 billion, up by 19 percent compared to P8.8 billion in 2010. - With Liza Reyes, ABS-CBN News