March 19, 2014

MBT closes offer period for Tier 2

Metrobank (MBT, Buy) announced that it has closedyesterday instead of 21 Mar the public offer period for its issuance of Basel 3 compliant Tier 2 Notes. The issue date is still targeted for 27 Mar 2014. The bank said that there was strong demand for the offering from institutional and retail investors. Moreover, the issue is more than 2x oversubscribed.

The notes will only be the second Basel-3 compliant instrument with a loss absorption feature that is issued locally. The notes will have tenor of 10 years and 3 months, with a redemption option for the bank after 5 years and 3 months. They will carry a coupon rate of 5.375% to be paid quarterly.

Our take: Despite the relatively new features of the notes, the prospective issuance was well-taken by the market and indicates confidence on MBT’s financial health. We believe that this issuance will pave the way for more issuances of Basel 3 compliant Tier 2 Notes by MBT and possibly other local banks.

More importantly, this shows that MBT and other local banks do not need to issue convertible notes, since the loss absorption feature has proven to be a viable option for Basel 3 compliant Tier 2 Notes. – WealthSec