Banco de Oro raises $120 million from placement

Together with a sale of $150 million worth of shares to IFC and an IFC-linked fund at the same price, the Philippine bank is able to pocket $270 million of fresh capital.

Banco de Oro Unibank (BDO), the largest bank in the Philippines in terms of assets, raised $120 million from a share placement late Monday, bringing the total amount of new funds raised to $270 million.

Earlier the same day, the bank announced that it had also sold $150 million worth of shares to the International Finance Corp and a fund founded by IFC and the Japan Bank for International Cooperation. The two transactions were made at the same price, which means the IFC and the fund, known as the IFC Capitalisation (Equity) Fund, essentially acted as anchors for the placement to other institutions.

"The deal was definitely marketed on the back of the IFC placement, which kind of rubberstamped the transaction," one source said.  

The shares were offered at a price of Ps41.50 apiece, which represented a 5.7% discount versus Friday's closing price of Ps44.00 -- or, as BDO noted in a press release, a 0% discount to the volume-weighted average price over the past 15 trading days. BDO's shares were suspended from trading on Monday as the placement was completed.

The discount versus the most recent market price was wider than that on a $94 million sell-down in Philippine infrastructure company Metro Pacific Investments (MPI) last week, which was offered at a fixed price of 3.2% below the latest close. However, it was still reasonably tight and the fact that investors were willing to absorb two share sales out of the Philippines within a seven-day period could be seen as a sign that the country is coming back in favour. As of yesterday, the benchmark Philippine Stock Exchange index was up 3.7% this year, which puts it in the upper half among the regional stock markets in terms of performance.

According to sources, the BDO placement, which was arranged by UBS, was sold mainly to international investors, primarily Asia-based, although there was some participation from domestic accounts as well. Given the relatively modest discount and the thin daily turnover in the stock -- the placement accounted for about 38 days' worth of trading -- hedge funds weren't really interested and long-only funds took the bulk of the deal.

Excluding the portion sold to the IFC and the IFC Capitalisation Fund, the deal comprised approximately 128.784 million new shares, or about 5.5% of the existing share capital. At the fixed price of Ps41.50 this gave a base deal size of Ps5.345 billion ($120 million), which was slightly more than the $100 million that the company flagged in the press release on Monday. On top of that, there was also an upsize option of $30 million, but that wasn't exercised.

There was no information about the total order amount, although the fact that the upsize option was allowed to lapse suggests that the oversubscription wasn't that strong.

However, together with the IFC portion, BDO has received a substantial capital injection, corresponding to about 12.5% of its existing share capital, which it said will be used to support its medium-term growth. It will also help boost its capital ratio ahead of new international guidelines. According to the release, BDO's tier-1 capital ratio will improve to 10% from 8.4% following the deal and its total capital ratio will increase to 14% from 12.4%. 

BDO's share price fell 5.7% when it resumed trading yesterday, closing in line with the placement price of Ps41.50. During the session it traded in a range between Ps41 and Ps42.

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