The Philippines’ largest lender, BDO Unibank, added new supply to the scarce offering from this market as it priced on August 30 a US$700 million issue, representing the largest bond transaction so far by a Philippine bank.
The Reg S 5-1/2 year deal was priced at 99.909% with a coupon of 2.95% to offer a yield of 2.968%. This was equivalent to a spread of 125bp over US treasuries, which was in line with the final price guidance and 25bp tighter than the initial guidance of the 150bp area.
The bonds performed in the secondary market and were quoted at 100.30% after lunch on August 31. The transaction has been positive for BDO and has pulled its entire credit curve tighter.
As a repeat issuer, BDO is a familiar name with the investors and as such the deal arrangers – Bank of America Merrill Lynch, HSBC and Wells Fargo Securities – opted for an accelerated timetable to execute the deal, which did not require a roadshow.
Adopting a two-day execution process, the mandate was announced on August 29 allowing investors to update their credit work through a series of global fixed income investor conference calls. That allowed the arrangers to launch the deal on August 30 when the market sentiment was constructive, providing an ideal issuance window.
The transaction was launched with an initial price guidance of the 150bp area over US treasuries. The order book at one point was in excess of US$2.4 billion, enabling the issuer to tighten the guidance to 125bp and increase the deal size to US$700 million. BDO was looking for a benchmark size when the deal mandate was announced on August 29.
In terms of where the deal was priced, BDO’s most recent comparable was trading at a G-spread of 115bp, and given that there is a half-year extension, the fair value would be in the context of around 120bp. “It’s a pretty negligible new issue concession given the larger issue size,” says a banker familiar with the deal.
The offering eclipsed the previous largest Philippine bank US dollar bond transaction for Rizal Commercial Banking Corporation in October 2015 when it raised US$320 million for 5.25 years.
BDO last tapped the US dollar bond market in October 2016 when it printed a US$300 million deal for five years, which achieved the lowest coupon ever for a bond issuance from the Philippines at that point in time.
The issue was priced at 2.630% and was part of the bank’s liability management initiatives to tap longer-term funding sources to support US dollar-denominated projects and effectively refinance the US$300 million bonds that matured in February 2017.
The latest offering was drawn from BDO’s US$2 billion medium-term note programme and the proceeds will be used to finance the bank’s operations and for general corporate purposes. Apart from the three deal arrangers, Mizuho Securities and MUFG participated in the transaction as co-managers.
There has been a scarcity of US dollar bond supply from the Philippines this year as the local issuers have so far shunned the offshore debt market in their fund raising and have largely relied on domestic liquidity. Another offshore bond deal to come out of that market in 2017 was back in January when the sovereign sold US$500 million in new bonds, which were arranged in conjunction with a one-day accelerated switch tender – its trademark liability management exercise.
Another supply is forthcoming from the Philippines with Ayala said to be looking for a US dollar fixed-for-life perpetual deal. It will commence a roadshow next week.
Photo: krissalvosa.com
