BPI Fixed-rate Bonds due 2024: Frequently Asked Questions


Note: These FAQs are for information only and are qualified in its entirety by the more complete information in the Offering Circular and the Pricing Supplement. Investors are required to read and understand the Offering Circular and the Pricing Supplement, and all the terms and conditions relating to the issuance prior to making an investment decision in the Bonds.

Who is BPI?

Established in 1851, Bank of the Philippine Islands (“BPI”) is a universal bank with an expanded banking license. Together with its subsidiaries, the Bank offers a wide range of financial products and services that include corporate banking, retail banking, investment banking, asset management, securities distribution, insurance services, credit cards, payments and leasing.

On September 30, 2021, the Monetary Board approved the planned merger of the Bank of the Philippine Islands (“BPI”) and subsidiary BPI Family Savings Bank (“BFSB”), with the former as the surviving entity and merger will become effective upon the issuance of the SEC of the certificate of merger or by January 01, 2022, whichever is later.

BPI’s total assets stood at Php 2.26 Trillion as of September 30, 2020. The Bank also holds a significant market share in the deposit, lending, and asset management markets.

BPI’s consolidated common equity tier 1 (“CET1”) ratio stood at 17.64% while its capital adequacy ratio (“CAR”) stood at 16.76%, as of September 30, 2020. These are above the minimum regulatory capital requirements set by the Bangko Sentral ng Pilipinas (“BSP”) under Basel III.

Why is BPI issuing bank bonds?

This issuance is a way for BPI to raise funding for general corporate purposes including refinancing.

Are bank bonds insured?

As these are not deposit instruments, they are not insured by the Philippine Deposit Insurance Corporation.

Can bank bonds be pre-terminated by the holders?

No. Holders of the bonds are not allowed to pre-terminate the bonds prior to the stated maturity. However, bondholders may sell their holdings in the secondary market through the PDEx. Moreover, the sale will be subject to the availability of a willing buyer in the market and may be subject to taxes, fees and other charges.

What are some of the risks involved in investing in bank bonds?

Bank bonds typically pay a fixed rate until its stated maturity date. If investors decide to sell bonds in the secondary market, they shall be exposed to price risk depending on the prevailing market rate/price of the bank bonds at that time. Secondary market trading may also involve liquidity risk, wherein there is no assurance that an active secondary market for the bank bonds will develop or how the bank bonds will perform.

The liquidity and the market prices for the bank bonds can be expected to vary with changes in market and economic conditions, the financial position and prospects of the issuer and other factors that generally influence the market prices of securities. There is no assurance that bank bonds may be disposed at prices, volumes or times that are deemed appropriate by the bondholders.

The above does not purport to be a complete description of all of the risks involved in investing in the Bonds and is qualified in its entirety by the more complete information provided in the Offering Circular and the Pricing Supplement. The investor should read “Investment Considerations” in the Offering Circular and the Pricing Supplement, for more information on potential risks related to the Bonds.

When will investors receive interest payments on the Bonds?

Investors will receive interest payments every quarter in arrear, computed based on the outstanding balance of the Bonds. Interest on the Bonds shall be calculated on a 30/360 basis. If any Interest Payment Date would otherwise fall on a day that is not a Business Day, payments will be made on the subsequent Business Day without adjustment of the amount due.

Are the bonds subject to a tiered or increasing interest rate?

No. The Bonds offer a fixed coupon rate to all investors throughout its life.

Is partial sale of the Bonds allowed?

Yes, subject to the regulations of PDEx. In the event that the bondholder would like to sell only a portion of their investment, the original Registry Confirmation (“RC”) should be given to the trading participant. The original RC will then be cancelled and the Registry will issue two new RCs, one with the transferred amount to the new investor, and the other with the remaining amount retained to the original holder. This, however, is subject to the minimum holding amount and subsequent increments of the Bonds of Php 1,000,000 and in increments of Php 100,000 thereafter.

How much is the maximum allowed investment?

There is no ceiling or maximum allowed investment. However, there is a minimum required investment of Php 1,000,000 and in increments of Php 100,000 thereafter.

What are the tax implications of investing in the Bonds?

Interest on the Bonds is subject to final withholding tax at a rate of 20% or 25%, or such other rates as may be required by law or regulations, depending on the type of bondholder:

Philippine citizens and resident alien individuals — 20%
Non-Resident aliens doing business in the Philippines — 20%
Non-resident aliens not doing business in the Philippines — 25%
Domestic — 20%
Resident foreign corporations — 20%
Non-resident foreign corporations — 25%

The aforementioned final withholding tax rates may be reduced by applicable provisions of tax treaties in force between the Philippines and the tax residence country of the non-resident Bondholder. Most tax treaties to which the Philippines is a signatory provide for a preferential reduced tax rate of 15% for Philippine sourced interest income paid to a resident of the other contracting state.

The above does not purport to be a complete description of all applicable taxes to the Bonds and is qualified in its entirety by the more complete information provided in the Offering Circular and the Pricing Supplement. The investor should read the “Philippine Taxation” section in the Offering Circular for more information on applicable taxes and the “Summary of the Offer – Tax Exempt/Treaty Documents” under the Pricing Supplement. Prospective purchasers of the Bonds are advised to consult their own tax advisers as to the tax consequences of the purchase, ownership and disposition of the Bonds, including the effect of any national or local taxes, under the tax laws or regulations relevant thereto, such as but not limited to Revenue Memorandum Circular No. 7-2015, Revenue Memorandum Order No. 14-2021, and related issuances of the Bureau of Internal Revenue, applicable in the Philippines and any other country of which they may be nationals or residents.

How do I avail of tax treaty benefits?

For Bondholders claiming tax treaty relief pursuant to RMO 14-2021, the Bondholder must submit prior to the payment of interest due:
1.three (3) originals of the BIR Form 0901-I (Interest Income) or Application Form for Treaty Purposes filed by the Bondholder or, if the Bondholder is a fiscally transparent entity, each of the Bondholder's owners or beneficiaries,

2. one (1) original of the valid and existing tax residency certificate duly issued by the respective foreign tax authority of the country of residence of the Bondholder or, if the Bondholder is a fiscally transparent entity, the country of residence of each of the Bondholder's owners or beneficiaries in the form acceptable for recognition under Philippine laws,

3. the relevant provision of the tax treaty providing for the claimed tax exemption or preferential tax rate, in a form acceptable to BPI,

4. three (3) originals of the duly notarized, consularized or apostilled (as the case may be), if executed outside of the Philippines, Special Power of Attorney executed by the Bondholder or the Bondholder's owners or beneficiaries, as may be applicable, in favor of its authorized representative (if the Application Form for Treaty Purposes and other documents are accomplished by an authorized representative) and confirmation acceptable to BPI that the Bondholder or the Bondholder's owners or beneficiaries, as may be applicable, is/are not doing business in the Philippines to support the applicability of a tax treaty relief; and

5. an original or certified true copy of the Certificate of Entitlement (COE) issued by the BIR International Tax Affairs Division (ITAD) certifying the Bondholder’s entitlement to tax treaty relief in connection with the Offer Bonds.

The Bondholder shall be responsible for filing a tax treaty relief application (TTRA) with the BIR ITAD to prove its entitlement to tax treaty relief, and in relation thereto, BPI shall, upon request of the Bondholder, provide the relevant documents which are required to be submitted for purposes of filing a TTRA. For avoidance of doubt, in order for the preferential rate to apply, the Bondholder must submit the COE issued by the BIR and the updated Tax Residency Certificate (TRC) before the last day of the first month of the taxable year or at least ten (10) days before the first interest payment for the taxable year, whichever is earlier.

BPI shall make its own determination in each case as to whether, in its sole, prudent and reasonable discretion, on whether such documents sufficiently establish such tax benefit and/or exemption available for any specific payment on the Fourth Tranche Bonds.

Are “Joint Investments” allowed in this instrument?

Yes. Joint investments in “and” or “or” accounts are allowed.

Are joint investors required to submit IDs for all names listed in the ATP or just for the principal investor?

Yes. All joint investors are required to submit IDs for all names listed in the ATP to comply with relevant Anti-Money Laundering Association (“AMLA”) regulations.

How do I know if I am a Prohibited Holder?

Generally, the following are prohibited to hold the Bonds:

1. the Issuer, including its related parties such as its subsidiaries, affiliates and any party (including their subsidiaries, affiliates and special purpose entities) that the Issuer exerts direct/indirect control over; the Issuer’s DOSRI (as defined under the Manual of Regulations for Banks (“MORB”)) and their close family members, and corresponding persons in affiliated companies; and such other person or entity whose interests may pose potential conflict with the Issuer’s interest or who are identified as related parties pursuant to Section 131 of the MORB in relation with BSP Circular No. 1062, except (i) the Issuer’s trust department or related trust entities, or (ii) an underwriter or arranger that is an Issuer’s related party, provided that the holding of the Bonds is part of the underwriting agreement, and such underwriter or arranger has complied with the requirements of Governing Regulations;

2. such persons who are otherwise not qualified under the Governing Regulations including any other person whose acquisition, holding or transfer of the Bonds would violate any applicable law or regulation, including but not limited to the rules of the PDEx, BSP, AMLC, or other government regulation in any relevant jurisdiction;

3. US Person; and

4. Persons classified as a Restricted Parties.

Who are the specific related parties considered as “Prohibited Holders”?

The term “Prohibited Holders” includes BPI’s related parties who are in possession or have access to material and non-public information which can affect the pricing and marketability of upcoming and outstanding BPI bond issuances, such as:

1.
With respect to any issuance of BPI’s bonds:
1.1. BPI Subsidiaries;
1.2. BPI Affiliates;
1.3. Directors of BPI;
1.4. BPI officers holding positions of senior vice president or higher;
1.5. Officers and staff of BPI in the following departments/ divisions/ segments:
1.5.1. Global Markets;
1.5.2. Risk Management Office;
1.5.3. Compliance Office;
1.5.4. Office of the Corporate Secretary;
1.5.5. Unibank Centralized Accounting Division;
1.5.6. Corporate Planning;
1.5.7. Legal; and
1.5.8. All Assets and Liabilities Committee attendees;
1.6. Spouses, children, and parents of all individuals covered by items (iii) to (v) above.

2. With respect to any issuance of BPI’s bonds, the following persons for the duration that they are engaged for a proposed issuance of any tranche/ series of BPI’s bonds:
2.1. Select officers and staff of Arrangers and Selling Agents;
2.2. Select officers and staff of Bond Booking Vehicle;
2.3. Select officers and staff of Legal Counsels;
2.4. Select officers and staff of Auditors."

Can a minor be included as an investor?

Yes, provided that the beneficiary opens an “In Trust For” (ITF) account, where the signatory is the parent or legal guardian of the child, to invest in the Bonds.

What and how much are the fees in the secondary market?

Trading participants may charge different rates depending on the transaction being executed in the secondary market.

Can a dual citizen (Filipino and U.S.) invest in the Bank Bonds?

No. A U.S. dual citizen is still classified as a U.S. person under U.S. Securities regulations as well as FATCA regulations and thus would be ineligible to invest in the Bonds.

Why are U.S. persons prohibited holders?

This is to comply with various regulations, which require specific and burdensome requirements for any offers into the U.S. or to U.S. Persons anywhere in the world, including U.S. securities laws and regulations as well as Foreign Account Tax Compliance Act (“FATCA”), which was created to prevent evasion of U.S. tax liabilities by U.S. persons, including U.S. dual citizens.

Who do I contact regarding BPI Fixed-rate Bonds due 2024?

Interested investors may visit any BPI branch or contact BPI Capital at (02) 8246-5166; (02) 8246-6154 or (02) 8246-5145.

For inquiries and comments, send us a message or call our 24-hour BPI Contact Center at ‎(+632) 889-10000.

Disclaimer

The bonds referred to in this communication are securities exempt from registration under section 9.1(e) of the securities regulation code and will accordingly not be registered with the securities and exchange commission. Furthermore, the bonds are not deposit instruments and are not insured by the philippine deposit insurance corporation (“PDIC”).

This announcement is subject to change/completion and is not an offer for sale of the Bonds or a solicitation of an offer to buy the Bonds. Prospective investors should refer to the Offering Circular dated January 13, 2020 and the Preliminary Pricing Supplement as may be amended or qualified by the Final Pricing Supplement (together, the “Pricing Supplement”) for full details on the issue. BPI and the Joint Lead Arrangers reserve the right to adjust the Offer Period and the Issue and Listing Date. All terms are subject to the Offering Circular and Pricing Supplement.

This does not purport to, and does not, contain all of the information that may be required to evaluate factors relevant to a recipient making any investment decisions. Each recipient should make its own independent appraisal of, and investigation into, the financial condition, risks, creditworthiness, affairs, status and nature of BPI as the basis of any investment decision.
None of the information should be interpreted as investment advice of any kind and should not be used as the basis for any financial decision to invest in the Bonds or any securities or participation in any transaction. No warranty or representation, express or implied, is given as to the accuracy or completeness of that information. In no event will BPI, its affiliates, any of the Joint Lead Arrangers, the Sole Selling Agent or the Participating Selling Agent, nor any of their respective directors, employees or advisors accept any liability with regard to the information contained herein.