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BDO Unibank Inc. said over the weekend it signed an agreement to sell a controlling stake in publicly-listed unit BDO Leasing and Finance to a third party as part of restructuring the bank’s leasing business.
The restructuring of BDO’s leasing business is being undertaken to optimize the financial needs of clients in light of new accounting regulations covering lease transactions.
IFRS 16, which took effect in January 2019, requires leases to be recognized on balance sheet, similar to a loan facility. This makes lease transactions a less attractive option to corporate borrowers compared to the past.
Under the restructuring process, BDO has incorporated a new, privately-held finance company, BDO Finance Corp., to provide customers access to lease products and services.
BDO Finance will assume current lease transactions booked in BDOLF to provide continuity to current clients. Meanwhile, clients who now find regular bank loans more attractive against leases can gain access BDO’s wide range of products and services.
“We wish to reassure BDOLF clients that their financing requirements will continue to be serviced, and there will be no effective change in their existing lease arrangements that will be assumed by BDO Finance,” said BDOLF president Roberto Lapid.
BDOLF will be re-named and its articles of incorporation and by-laws will be amended to reflect the new business direction. As required by regulation, a tender offer will be undertaken by the buyer to provide minority shareholders an opportunity to sell their BDOLF shares. The timetable and details of the tender offer will be announced by the buyer in due course.
The sale transaction is subject to closing conditions, including approval by regulatory authorities.
BDO is a full-service universal bank which provides a wide range of corporate and retail banking services. These include traditional loan and deposit products, as well as treasury, trust banking, investment banking, private banking, rural banking, cash management, leasing and finance, remittance, insurance, retail cash cards, credit card services and stock brokerage services.