March 10, 2014

MBT to issue Basel 3 Tier 2 Notes

In a disclosure to the Exchange today, Metrobank (MBT, Buy) said that it will commence the offering of Basel 3 compliant Tier 2 Notes. The offer period is from March 10 to 21, 2014 while the targeted issue date is on March 27. The notes will have a tenor of 10 years and 3 months, with an option to redeem after 5 years and 3 months. In compliance with Basel 3, the notes will have a loss absorption feature.

Our take: The upcoming notes issuance has been well-flagged by the bank to the market. In previous disclosures, MBT said that it has secured board approval to issue up to $500m worth of Basel 3 compliant Tier 2 Notes, with the flexibility of issuing this in either peso or dollar or a mixture of both. The issuance is expected to strengthen MBT’s capital base in light of the stricter capital requirements of Basel 3.

However, with the loss absorption feature, the notes may be subjected to impairment to share in potential capital losses of the bank. Nonetheless, the presence of this feature should allay earlier concerns that MBT would have to issue potentially dilutive notes that are convertible to equity. – WealthSec