HSBC managed the transaction, which trumps MetrobankÆs Ps8.5 billion offering in October.
ôThe larger Philippine banks are quite aggressive and very optimistic in the growth of their loan portfolios. As a result, they are always looking at raising more capital in the market,ö says a source close to the deal.
In general, domestic markets across Asia have been relatively unaffected by the subprime storm that has brought offshore issuance to a halt. Philippine banksÆ exposure to toxic subprime mortgages and CDOs has been relatively contained, allowing its domestic market to remain active.
ôThe Philippines peso market is flush with liquidity, with domestic offerings competitively priced compared to offshore rates at the moment. Issuers are therefore trying to raise funds domestically if they can,ö continues the source.
Although offshore markets traditionally allow borrowers to issuer larger size-to-price offerings and longer tenors, domestic bond markets are slowly able to cater to more ambitious transactions.
ôIt is rare for such size and tenor to be achieved domestically, and this marks an ongoing trend in the Philippines and other markets, of increased investor sophistication in terms of their understanding of risk and their willingness to invest for longer periods.ö
Three times oversubscribed, total demand for the fixed-rate unsecured subordinated lower tier-2 bonds reached Ps15 billion, leading the transaction to be upsized from an initial Ps5 billion. The deal priced at par with a coupon of 7%.
In terms of investor distribution, 44% of the bonds sold to retail, 9% to banks and fund managers, 4% to corporations, and 43% to pension funds and insurance companies. The International Finance Corporation, a minority shareholder in Banco de Oro, was a major participant in the transaction.
"This reflects the IFCÆs continued commitment to the bank, as well as to supporting the development of the Philippine capital markets," says Jesse Ang, IFC acting country manager for the Philippines and Thailand.
The Philippine domestic bond market still lags behind its bank lending and equity sectors, with a market primarily composed of government bonds and long-term commercial paper issued by prime local corporations, according to Asian Bonds Online. Government issues currently dominate the market with few alternatives for other debt instruments.
The corporate bond sector is less developed in terms of product range, profile of issuers, and investor base, and debt securities are currently traded through bilateral private negotiations or over-the-counter transactions.
The government established a fixed-income exchange infrastructure in 2005 to develop market liquidity and encourage debt issuance. "As of 2006, the ratio of debt vis-a-vis GDP was 37.5%. Government debt/GDP was 37.2% while corporate debt/GDP was steady at 0.3%," according to the website.