UnionBank lists P11 billion 2-year debt

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UnionBank of the Philippines, Inc. raised P11 billion via the issue of peso notes, the proceeds of which will go towards meeting tighter liquidity requirements.

Aboitiz-controlled UnionBank also listed the P11 billion fixed-rate debt issue at the Philippine Dealing & Exchange Corp. (PDEx) in Makati City on Thursday.

The notes will mature in two years and carry an interest rate of 7.061%, payable quarterly until 2020.

The listing represents the initial tranche of its P20-billion bond or commercial paper program approved by its board on Aug. 31.

In his speech at the listing ceremony, UnionBank treasurer and chief financial officer Jose Emmanuel U. Hilado said the offer received “overwhelming interest” from investors.

“We were only planning to issue P5 billion. We ended up issuing P11 billion because of overwhelming interest from both institutional and retail investors,” Mr. Hilado said.

“This kind of instrument is friendly for the liquidity coverage ratio because the full implementation in 2019 wherein you have to maintain a 100% liquidity coverage ratio,” he said. “So you need longer term liabilities instead of having just the usual short-term deposits.”

Banks have been tapping the capital markets in recent months to raise more capital ahead of stricter risk management requirements that will take effect on Jan. 1, 2019 under the international Basel 3 framework.

The Hongkong and Shanghai Banking Corp. Ltd. as well as Standard Chartered Bank were lead managers and bookrunners, and were also selling agents alongside UnionBank.

The listing brings the total volume of outstanding securities listed at the PDEx to P1.013.27 trillion, floated by 50 companies.

The Bangko Sentral ng Pilipinas recently allowed lenders to raise funds with greater ease through corporate debt paper, with new regulations doing away with approvals.

Bank of the Philippine Islands as well as Metropolitan Bank & Trust Co. recently issued fixed-rate commercial bonds, raising P25 billion and P10 billion, respectively.

Mr. Hilado said “it’s hard to say when” UnionBank will issue the next tranche, although he noted that it will be a “regular product.”

“As the bank grows, your ratios adjust. If growth is solid, that means you need to keep doing issuances like this to comply with the ratios,” he said.

“I think it will be a regular product because it’s flexible, you don’t need central bank approval. So as the need arises, you just start issuing.”

UnionBank closed at P65.95 on Friday, down 95 centavos or 1.42%. — Karl Angelo N. Vidal