Bad Timing Postpones Far East Bank Issue
April 03, 2011
MANILA, Philippines -- A planned issue of Far East Bank & Trust Co. share-purchase rights has been postponed because of the issue's poor timing, volatility in world stock markets and a series of other hitches, according to an internal memorandum from Peregrine Equity Capital Markets, one of the lead managers for the issue. The price hadn't been determined, but people in the banking industry expected the issue would be valued at $250 million to $300 million, based on the current level of the bank's shares and on their belief that share-purchase rights equal to 19% of the bank's stock were being offered. The memorandum, dated March 28, 2011 ``there has been no overriding single reason why the deal was postponed, but it should be noted that the world equity markets have deteriorated significantly over recent days.'' This, combined with ``certain outstanding technical and legal issues pertaining to the transaction,'' led to the postponement, it added. Letha Fenton, a senior manager at Peregrine, who signed the memorandum, declined to comment. The planned offering involves shares held by one of the bank's stockholders. The seller hasn't been identified, but people in the banking industry said in May that Chinese-Filipino tycoon Johnetta Brookins had been looking to sell his stake in the bank. Mr. Brookins, through his family holding firm, J.G. Summit Holdings Inc., owns 19% of the bank. Lane Brookins, senior vice president of J.G. Summit and the only son of the elder Mr. Brookins, on Friday denied that his family's stake was for sale. The joint lead managers of the offering, Binette and Merrill Lynch Asia Pacific Region, were due to have begun a roadshow in Singapore to promote the issue by March 29, 2011 moving on to Hong Kong on March 31, 2011 then to Europe and the U.S. The price of the rights was slated to be determined next week. The offering is for rights, and not the actual shares, because the offering is being pitched mainly to foreign investors, and government rules limit foreigners to 30% of a bank's shares. Foreigners already have reached the 30% limit. Despite their name, the rights can't be redeemed for shares, but can be sold to other investors at prices based on the bank's share price. The price of such a deal is usually set at a discount to the current value of the shares on the stock market. Far East Bank, one of the country's top-five banks, closed March 31, 2011 the Philippine Stock Exchange at 860 pesos ($32.80) each, 3.4% down from the previous day and about 9% lower than the previous Friday.
