Early redemption for RCBC’s P10 billion notes due 2024

MANILA, Philippines — Rizal Commercial Banking Corp. (RCBC) is retiring P10 billion worth of debt ahead of schedule to save on interest payments after successfully raising P15 billion from a fund raising activity early this year.

Ma. Christina Alvarez, corporate planning head at RCBC, said in a disclosure the bank’s board of director approved the exercise of a call option to redeem its P10 billion 5.375 percent Tier 2 capital notes issued in June 2014.

The notes due September 2024 are callable on Sept. 26.

“There is no need to extend and pay the step up rate,” Alvarez told The STAR.

Banks have been redeeming debt instruments issued a few years ago to avoid paying step-up in interest rate.

Alvarez said the Yuchengco-led bank successfully raised P15 billion.

“We raised P15 billion in capital last year so we have enough capital today,” Alvarez said.

According to Alvarez, RCBC has various cheaper source of funding that may be used to pay down the maturing Tier 2 notes issued in 2014.

“Furthermore, the capital benefit of the maturing Tier 2 in the bank’s capital ratios falls out after the fifth year making it an expensive source of funding should we extend it,” she said.

Last January, RCBC raised P15 billion from the issuance of peso green bonds last January, the first green bond from the Philippines under the ASEAN green bond standards 2018 and fully aligned with the International Capital Market Association’s green bond principle 2018.

It is currently raising at least P5 billion from the issuance of the maiden peso-denominated ASEAN sustainability bonds under the ASEAN Sustainability Bond Standards 2018.

As of end-March, RCBC’s total resources expanded by 14 percent to P664.7 billion from P585.7 billion. Its capital funds stood at P83.3 billion and well above the minimum regulatory requirement with a capital adequacy ratio of 16.14 percent and common equity Tier 1 ratio of 13.34 percent.