BPI Capital Corporation President Rhoda “Chiqui” Huang was ecstatic as she reported to her board late last month.
BPI Capital, a wholly-owned subsidiary of Bank of the Philippine Islands (BPI), had acted as Sole Global Coordinator for two recent consecutive issues – spaced five days apart – of the BPI Green Bonds.
The first was denominated in Swiss Francs (CHF) and the second in US dollars.
In late 2018, Credit Suisse and Union Bank of Switzerland pitched CHF Bonds as an alternative funding source to BPI. Last June, BPI management visited investors in Zurich and Geneva to engage CHF investors in a potential inaugural transaction and to introduce BPI, which is attempting to diversify its investor base.
On August 29, BPI launched its CHF 100 million two-year green bond issuance, achieving several firsts: 1) first CHF-denominated bond from the Philippines 2) first offshore ASEAN Green Bond offering by a Philippine Bank 3) first negative-yielding bond to be issued out of the Philippines and Southeast Asia.
Huang reported that investor response to BPI’s first CHF bond was a pleasant surprise. The CHF bond was oversubscribed just 90 minutes after the opening of the market.
The CHF 100 million 2-year Green Bond successfully priced at MS+96.8 bps (-0.02% YTM), inside the tight end of the initial price guidance.
Similarly, BPI has been monitoring the international bond markets for an opportune window following the reestablishment of its Euro Medium Term Note (EMTN) program. BPI decided to proceed with the US Dollar bond deal to take advantage of the tightest credit spreads.
On September 3, just 5 days after the successful CHF issue, BPI raised US Dollar 300 million, 5 years, via an ASEAN Green Bond Issuance. BPI successfully priced the dollar bond at T+120 bps.
“This represents a negative new issue premium of -6 bps, which is unprecedented,” Huang enthused.
“This represents the first new issue discount from the Philippines since the Republic of the Philippines bond offering in 2018 and the largest new issue discount for a Southeast Asian bank since 2016.”
SEC Commissioner Ephyro Amatong, a prime advocate of the ASEAN Green Bond, was so elated he approved the registration of the bonds as ASEAN Green within a day.
Translated in layman’s terms, the foregoing cases simply mean that foreign fund sources – asset managers, private banks, insurance companies – are willing to lend to BPI at attractive rates because of their faith and confidence in the resilience and growth story of BPI.
BPI entered the market with an Issuer Rating of Baa2 (Moody’s), BBB+ (S&P) and BBB- (Fitch).
S&P Global Ratings recently raised BPI’s credit rating to “BBB+” putting the BPI on a par with the above-minimum investment-grade granted to the country.
Here is what is even more astonishing. In the case of the Swiss Franc deal, on maturity, the lenders are paying BPI US Dollars 40,000 for the privilege of lending BPI CHF 100 million! Now, try to beat that.
BPI President and CEO Cezar “Bong” P. Consing quoted Finance Secretary Carlos G. Dominguez III as saying: “Lia (National Treasurer Rosalia V. De Leon) should also do a Swiss Franc deal.”
But the bigger story is how the funds will eventually be redeployed.
In line with the Ayala Group’s sustainability blueprint, BPI has developed its own Green Finance Framework. The Framework has been established to continue BPI’s thrust to promote positive environmental and social practices in its core markets.
The Green Finance Framework establishes the following procedures: 1. use of proceeds 2) project evaluation and selection 3) management of proceeds and 4) reporting.
Thus, the proceeds of the two bond issues will be allocated to selected Eligible Green Projects.
These Eligible Green Projects fall in the following categories: 1) renewable energy 2) energy efficiency 3. sustainable water and wastewater management 4) pollution prevention and control and 5) green buildings.
Disclosure: The writer is an Independent Director of both BPI and BPI Capital.
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