BANCO DE ORO Universal Bank Inc. (BDO), the country’s biggest lender by assets, on Monday said it will issue P5 billion of unsecured subordinated notes in a move to boost its capital and fund its expansion.

The issuance of the tier-two notes will have a maturity of 10 years and three months from the issue date, with a call option of the bank after five years.

The bank will offer the notes from June 6 to June 17, with the issue date tentatively set for June 27.

Deutsche Bank and Hongkong and Shanghai Banking Corp. were picked as joint lead arrangers and selling agents. Multinational Investment Bancorporation was also designated as selling agent, while BDO, BDO Private Bank and BDO Capital will act as limited selling agents for the transaction.

The bank explained that it will use the funds to enhance the bank’s capital adequacy ratio (CAR), a measure of ability to sustain losses without having to call for recapitalization. As of March, the bank’s CAR stood at 14 percent. The Bangko Sentral ng Pilipinas (BSP) requires banks to maintain a CAR of at least P10 percent.

BDO president Nestor Tan earlier said he has secured authority from the BSP to sell as much as P15 billion worth of lower tier-two debt paper they plan to supplement the bank’s core or equity capital.

Tan said the idea was to pace the capital-raising program given that the BDO has enough internally sourced capital of its own.

“We will pace the issuance, as we have enough capital for the moment,” he said.

The fund-raising campaign could take place over a one-year period depending on how BDO management will craft the program.

Tier-two notes allow banks to raise capital by borrowing the funds from external sources instead of asking their own shareholders to put in more funds through equity.

The bank aims to generate a net income totaling P10.5 billion this year, but has generated P2.44 billion in the first three months.