Listed and 5th largest bank PNB (PSE: PNB) is offering 2-year bonds to those looking for lower risk investment options. Compared to bonds recently issued by major local companies, such as SMC Global Power Bonds, this one carries a short tenor of just 2 years (most carry 3 to 7 year tenors).
What Are Bonds Again?
Here’s a quick recap on what bonds are:
Basically, bonds are corporate borrowings from the investing public. As an investor who puts money into bonds, you get a fixed interest rate (usually paid quarterly) throughout the whole life of the bond (for this case, 2 years). Then the principal (the amount you invested) is returned to you at the end of the period.
Bonds are not PDIC-guaranteed unlike deposits. Interest income is taxed at 20% (compared to 10% tax on dividend income of common and preferred shares). The risk here is when the company is unable to meet its financial obligations, say it goes bankrupt, then it will have to go through a liquidation process first before proceeds are paid out to various creditors etc (including you). For PNB, what are the chances?
PNB Bond Offering
The offering started last Monday, Apr 15. They aim to raise P5-billion through this offering, with the option to upsize depending on demand. More details below:
- Offer Period: April 15 to 30, 2019
- Interest Rate: 6.3% per annum
- Minimum Investment: P100,000 (increments of P50,000 in excess of P100,000)
- Maturity Date: Year 2021
- Interest Payment: Quarterly
- Issue Date: May 8, 2019
Interested customers may go to the nearest PNB branch. Juan may also inquire with Standard Chartered Bank, as they are the sole arranger and book runner.
Previous bonds had a lower minimum investment required at P50,000, but I guess PNB is confident that the offering will be filled despite the higher minimum investment, anyway the term is much shorter and they’re just raising P5-billion (previous bonds raised P10 – 60 billion).
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Image from PNB Twitter and website.