Metrobank looking to raise $0.5-B in USD debt offering

Metrobank [MBT 61.95, up 0.2%] [link] announced that it has selected Bank of America Securities and UBS as joint global coordinators to run a process to sell up to $500 million in dollar-denominated senior unsecured notes, “with option to upsize”. The offering comes as part of MBT’s $2 billion program that it established back in 2017 to finance the expansion of its loan portfolio and diversify its funding sources.

MB bottom-line: Both bonds and “notes” are types of debt, but they come with different risk/return profiles, maturity dates, and utility for the issuer. Notes are generally used by companies to raise money more quickly; they have a shorter maturity and (usually) pay a higher interest rate – even more if the notes are unsecured (meaning that they aren’t backed by any pledged assets), as they are here. Bonds are generally used for raising a larger amount of money to fund long-term projects; they have a longer maturity (20-30 years sometimes) and pay (generally) lower interest rates. As for why MBT might be selling US Dollar-denominated notes, it probably comes down to the bank looking to spread its currency risk. If all of its debt is Peso-denominated, then MBT’s ability to service that debt is tied to whatever happens to the Peso. As we saw with DITO CME [DITO 2.25, down 2.2%] when currency exchange changes caused its US Dollar-denominated debts to explode relative to its Peso-denominated revenues, being too heavily tied to a particular currency can expose a company to significant risks if that exposure is not mitigated. Perhaps currency risk mitigation is one of the bank’s goals with this transaction.

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