Monday, November 25, 2013

Union Bank to retire P3.75B debt notes

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MANILA, Philippines–Aboitiz-led Union Bank of the Philippines is set to retire P3.75-billion worth of debt notes previously qualifying as supplementary or tier 2 capital under the expiring Basel 2 capital adequacy framework.


In a disclosure to the Philippine Stock Exchange on Tuesday, Union Bank said it had obtained clearance from the Bangko Sentral ng Pilipinas to redeem these tier 2 notes prior to the call option date of October 15, 2014.


The tier 2 notes were issued in 2009 and due in 2019 but Union Bank had the option to redeem it by October 2014. The notes bear interest at the rate of 7.375 percent per annum payable quarterly but the rate would have increased if they were not redeemed by October 15 next year.


But based on the disclosure, Union Bank can retire these debt notes without waiting for next year’s call option date.


By January 2014, these lower tier 2 notes will no longer be eligible as the BSP has required the adoption of the Basel 3 framework on capital adequacy. The framework introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.


For its part, Union Bank has boosted its liquidity position ahead of the earlier retirement of these notes.


Last October, the bank debuted into the long-term negotiable certificates of deposit (LTNCD) market. It raised P3 billion in fresh funds at a coupon rate of 3.5 percent per annum. The LTNCDs are due on April 2019. Net proceeds were meant to boost deposit maturity profile and support business expansion plans.


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Tags: aboitiz , Banking , Union Bank , Union Bank of the Philippines



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