Security Bank: Lower Tier 2 Subordinated Notes

Attended the Security Bank Lower Tier 2 Subornidated Notes Presentation at Marco Polo Hotel Davao. (Details as follows)

Security Bank is offering to the general public a minimum of PhP 3.0 billion worth of Lower Tier 2 Subordinated Notes ("LT2 Notes"). They will bear a fixed interest rate for the first five (5) years of the life of the LT2 Notes. Interest rate is not yet decided as of presentation time but it is expected to be around 8.5%.

Issue Rating: Fitch National Rating: A+ (phl)
Tenor: 10 years callable on the first banking day after the 20th Interest period.
Use of Proceeds: To refinance the PhP3.0 billion LT2 callable on 29 January 2009 and to further increase and strengthen the Bank's capital base.
Interest Periods: Quarterly
Interest Rate Basis: 30/360
Reset Date: 5 Years after Issue date, if Redemption Option not exercised.
Minimum Investment: PhP 500,000 with increments of PhP 100,000 thereafter.
Offer period: November 17, 2008 ~ November 28, 2008 (may be closed earlier)

What are Lower Tier 2 Subordinated Notes?

A subordinated debt is a debt that is junior in the right of payment of principal and interest to all depositors and other creditors of the Issuing Bank, except those creditors expressed to rank equally with, or behind holders of the subordinated debt. Therefore, LT2 Notes rank below bank deposits and other senior debt but have priority over common and preferred shares.

Should the Issuing Bank become insolvent, the subordinated debt shall be satisfied only after payment of other ordinary debts. LT2 Notes are not insured by the PDIC.

What are the benefits of investing in Lower Tier 2 Notes?

  • Higher Yield. The yields of LT2 Notes are usually higher than the rates on government securities and bank deposits. They yields of LT2 Notes are also tax exempt for individual investors and tax exempt institutions.
  • Step-up rate if call option of the Notes is not exercised. The LT2 Notes carry a call option which allows the Issuing Bank to redeem the notes before maturity subject to certain conditions. If the Issuing Bank does not redeem the LT2 Notes, a step up interest rate allows Noteholders to enjoy potentially a higher rate.
  • Liquidity mechanism for investors. The LT2 Notes may be traded in the secondary market subject to prevailing market prices. Negotiations and transfers of the LT2 Notes will be done through the Market Maker which is tasked to effect the secondary transfer and registration of the LT2 Notes in cordination with the Registry.
  • Independent rating by a third-party rating agency. Issuing Banks that offer Tier 2 Notes to the public are required to be rated by an independent rating agency recognized by the BSP. Such rating provides an independent and professional assessment of the Issuer's credit worthiness.
You may contact Security Bank through the following:
Trunkline: (632) 867-6788

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