The Development Bank of the Philippines (DBP) recently issued P6.5 billion worth of unsecured and subordinated tier 2 notes with a 7.75% coupon rate.
The notes mature in 10 years but have a step-up rate on its fifth year. This means DBP can redeem the notes on the fifth year or else it will have to increase the coupon rate.
Proceeds of the debt issuance will provide working capital to the bank and also increase its capital adequacy ratios.
What is a tier 2 note?