SEC okays BDO Leasing & Finance's P12-B STCP issue

By Zinnia B. Dela Peña (The Philippine Star) Updated December 15, 2010 

MANILA, Philippines - BDO Leasing & Finance Inc. has obtained the go-signal from the Securities and Exchange Commission to issue P12 billion worth of short-term commercial papers (STCPs).

Based on documents filed with the SEC, BDO Leasing said proceeds from the issue will be used to repay maturing obligations and expand loan portfolio.

Domestic credit watcher PhilRatings has assigned the issue a rating of PRS 2, which is defined as: “Above average (strong) capability for payment of commercial paper issue on both interest and principal. This is normally evidenced by many characteristics of a PRS 1 rating but to a lesser degree.”

The STCP line was increased from the existing P8 billion, which was similarly rated at PRS 2 minus in 2009 to date.

In issuing the rating, PhilRatings considered BDO Leasing’s solid market position and business synergy with parent company, Banco de Oro Unibank, Inc. (BDO); sufficient capitalization; benign inflationary pressure which limits interest rate risk; tempered profitability with margin compression; and improved asset quality.

BDO Leasing is one of the largest players in the country’s financing industry. It benefits from being part of the BDO Group, gaining name recognition and marketing referrals through BDO’s extensive branch network of 717 branches as of the second quarter of 2010.

While it increased its STCP issue, BDO Leasing can still accommodate the additional leverage. Its debt-to-equity ratio is still relatively conservative compared to its peers. As of June 30, 2010, the leasing firm’s debt-to-equity ratio stood at 1.7x.

Interest margin compression resulted in net income declining 17.9 percent from P365.6 million in 2008 to P300 million last year. Compression in interest margin was a result of a decline in the overnight lending and borrowing rates of the central bank; shift in lending focus to corporate accounts from small and medium enterprises (SMEs), with corporate accounts resulting in lower margins; and increase in competition from other industry players, as well as from banks.

Although the company’s interest margin was also lower in the first half of 2010 compared to that for the same period last year, net income improved from P117.6 million in the first half of 2009 to P144.3 million in 2010 as a result of a substantial increase in loan portfolio size.