Metrobank to raise $723m in rights offering

The Philippine banking unit of George Ty wants to boost its core capital ratio. If successful, the rights issue will be the country's largest equity deal in nearly two years.

Metropolitan Bank & Trust Company, the Philippine banking unit owned by local tycoon George Ty, has won approval for a P32 billion ($723 million) rights offering to help improve the bank’s core capital ratio.

If successful, the deal announced by Metrobank on Tuesday will be the country's largest equity capital raise in two years.

Metrobank has priced the rights offering at P73.50 per share, representing a 21.75% discount to the volume-weighted average price of the bank’s shares for each of the 10 previous trading days, according to the filing published on the Philippines Stock Exchange website.

The new shares are also being offered at an 11% discount to bank's share price at the start of the year.

Some 435.4 million new shares will be offered to existing shareholders at a ratio of one rights share for every 6.3045 common shares held as of March 18, the filing said.

The offer period will run from March 23 to March 27, with a listing date scheduled for April 7. JP Morgan and UBS are overseeing the rights offering as joint global coordinators and joint bookrunners. First Metro Investment Corp is the sole domestic lead manager, while HSBC is a co-manager and co-underwriter.

As of December 31, some 65.3% of Metrobank’s shares were held by Philippine investors and companies. After the rights offering is completed, foreign equity shall not exceed 40%, the filing said.

Recapitalising

The funds raised through the rights issue will go towards improving the bank's tier 1 capital ratio to comply with Basel III standards, as well as ensuring it keeps pace with loan growth.

“If a [bank’s] tier 1 ratio gets too low, they need to raise more equity to continue lending,” one source close to the deal told FinanceAsia. “In the Philippines, there’s a lot of recapitalising at the banks because more people are buying homes and need credit.”

Shares in Metrobank are up 13.5% so far this year. This is slightly better than the PSEi Index, which is up 8.3% year-to-date and is one of the region's best-performing country benchmarks thus far in 2015.

If the bank is successful in the rights issue, it will be the largest capital raise in the Philippines since LT Group netted $915 million in a follow-on share offering in April 2013, Dealogic data shows.

Equity capital markets activity in the Philippines has more than doubled this year over last year. Total equity issuance up to March 10 totaled $1.035 billion, compared with $415 million in the same period of 2014, according to Dealogic data.

Local issuers have been taking advantage of strong stock markets to raise capital. Metro Pacific Holdings — which has a range of utility, real estate and healthcare interests — raised $200 million from an accelerated top-up in February.

Philippine conglomerate GT Capital, meanwhile, secured P9.8 billion from a share placement, also in February. Other issuers include JG Summit and Ayala Land, which in January secured $200 million and $350 million, respectively.

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