BDO Unibank took the Philippines’ local bond market to a new level with a Ps35bn (US$668m) offering, the largest ever peso bond issuance by a Philippine bank.
Issued on February 11, the fixed-rate notes priced at par to yield 6.42% for a tenor of 1.5 years.
The deal adds real depth and diversity to the peso bond market, as BDO’s first public offering in its local currency and the largest single corporate issuance on the Philippine Dealing and Exchange Corporation.
Launched with a minimum size of Ps10bn, the issue attracted strong demand from trust and private banking clients and was oversubscribed in only three days, allowing BDO to raise more than three times its initial target.
The deal marks a significant step in the development of the Philippines bond market and is the biggest endorsement so far of sweeping reforms put in place since 2017.
The central bank, securities regulator, finance ministry and national treasury have been working together to bring the peso market into the 21st century, starting with measures to make the money markets more efficient and improve liquidity in government securities. In time, the improvements should filter down to the corporate bond markets, supporting long-term financings and freeing up banks to lend to infrastructure.
Bangko Sentral ng Pilipinas in October 2017 eased restrictions that had prevented commercial banks from selling peso bonds, removing requirements for prior approval, minimum tenor, collateral and a sinking fund, as long as banks meet certain requirements regarding corporate governance, risk management, capital adequacy and other similar issues.
BDO took the opportunity to diversify its funding sources, setting up a Ps100bn bond programme in August 2018 and timing its first issue to take advantage of a decline in local interest rates.
Standard Chartered, the sole arranger and bookrunner, recommended a tenor of 18–24 months, taking into account the novelty of the issue and strong interest in shorter instruments, and the 18-month maturity proved to be the sweet spot for investors. It is only the fifth peso bond from a Philippine bank under the new regulatory framework.
Execution was swift, with a three-day offer period for retail and institutional investors starting on January 30, allowing BDO to launch and price ahead of competing issues from other banks.
BDO returned to the market several times throughout 2019, firmly establishing itself as one of the country’s biggest corporate issuers.
BDO Capital & Investment Corp, BDO Private Bank and BDO Unibank were the selling agents.