BDO notes assigned at investment grade

Moody’s Investors Service has assigned an investment grade rating on the $2 billion medium term note program launched by BDO Unibank Inc. several years ago.

In a statement, Moody’s said it assigned a Baa2 long-term senior unsecured rating and P-2 short-term rating to BDO’s fund raising activity. The rating is a notch above minimum investment grade.

“The provisional ratings are in line with BDO’s Baa2 long-term and P-2 short-term deposit ratings and reflect the structure of the proposed issuance,” Moody’s said.

The listed bank, owned by retail and banking magnate Henry Sy, launched the $ 2 billion overseas debt facility in August 2014 to boost funds for long- term relending to big-ticket infrastructure projects under the government’s public- private partnership (PPP) program.

The Euro Medium Term Note (EMTN) program is a mediumterm foreign currency funding facility that gives flexibility to issue foreign currency-denominated notes in the international capital markets.

These are offered on a continuing basis rather than a onetime deal like a bond issuance making it easier for BDO to tap offshore capital markets.

The notes issued and traded outside of Canada and the US are sold directly to the market with maturities of less than five years.

Last month, BDO announced it was beefing up its capital base through a P60 billion stock rights offering to take advantage of the country’s sustained economic growth opportunities.

The fund raising activity would help BDO comply with the higher requirement to be imposed by the Bangko Sentral ng Pilipinas (BSP) on domestic systemically important banks (DSIBs) or too big to fail banks.

The BSP has directed DSIBs to set aside higher levels of capital for potential losses. Too big to fail banks are characterized as banks whose distress or disorderly failure would cause significant disruptions to the wider financial system and the economy.

DSIBs are required to maintain additional Common Equity Tier (CET1) of between 150 and 250 basis points of the banks’ risk- weighted assets ( RSA) beginning January 2017 until the same are fully in place by January 2019.

The bank’s consolidated CET1 ratio and capital adequacy ratio (CAR) of 11.3 percent and 13.1 percent, respectively, are above the current regulatory minimum levels, even with the gradual implementation of the DSIB surcharge.

BDO is ranked as the country’s largest bank in terms of total assets, loans, deposits, capital and trust funds under management. It has more than 1,000 operating branches and over 3,000 ATMs nationwide.

It also has a branch in Hong Kong as well as 26 overseas remittance and representative offices in Asia, Europe, North America and the Middle East.