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PHL raises $2.75B in global bonds

REUTERS

THE Philippines raised $2.75 billion (P132 billion) from its second dollar-denominated bond sale this year as it seeks to boost state coffers amid the economic slowdown.

The Bureau of the Treasury (BTr) sold $1.5 billion in 25-year dollar-denominated global bonds, and $1.25 billion in 10.5-year dollar bonds, National Treasurer Rosalia V. de Leon confirmed on Thursday. This marked the BTr’s second time to tap the dollar bond market this year.

In a statement on Thursday, the BTr said the 25-year notes were priced at 2.65%, 35 basis points (bps) tighter than initial pricing guidance of 3%, while the 10.5-year bonds fetched a coupon of 1.648%, or at US Treasury spreads of T+ 70 bps.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said these were the lowest coupon rates secured for the debt.

The appetite for the bonds was strong, with total orders for both tranches peaking at $8 billion, according to Ms. De Leon. The debt papers will be issued on Dec. 10.

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The BTr attributed the strong demand to favorable market conditions amid positive news on the development of vaccines against the coronavirus disease 2019 (COVID-19).

“Positive news on the COVID-19 vaccine trials over the past couple of weeks have created strong inflows in Asia-Pacific credit markets, which illustrates the Republic’s ability to capitalize on favorable market dynamics,” the BTr said in the statement.

Proceeds will be used to support the national budget, which is pegged at P4.5 trillion for 2021.

“The success of this issuance is once again a testament of the resilience and resolve shown by the Republic to ascend from these tribulations brought about by the pandemic. It also manifests the administration’s ability to identify and capture favorable market windows in such uncertain times,” Ms. De Leon was quoted as saying.

Finance Secretary Carlos G. Dominguez III said the successful offering showed that international capital markets acknowledge the economy’s robust fundamentals and the country’s plans to bounce back from a pandemic-induced recession.

Ms. De Leon said this will be the government’s last offshore bond issuance for 2020.

The dollar-denominated senior unsecured notes received “BBB+” long-term foreign currency issue rating from debt watcher S&P Global Ratings, while Fitch Ratings assigned it a “BBB” rating with a stable outlook. The BTr said the notes are expected to be rated by Moody’s Investors Service with “Baa2” rating.

Credit Suisse, Daiwa Capital Markets, Deutsche Bank, Morgan Stanley, Standard Chartered Bank and UBS served as the joint bookrunners.

Proceeds from the bonds can provide a more immediate funding source for the government’s pandemic response and relief measures to pump-prime the economy, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a Viber message.

“The market environment is indeed very much favorable for the issuance of new offshore bonds for the Philippine government amid near record low interest rates/borrowing costs,” Mr. Ricafort said.

“The US dollar bond offering of the Philippines would also help reduce any crowding out effects in the local credit market, or less competition from the government, by borrowing from the global market instead of the domestic market, thereby less pressure on local interest rates/borrowing costs,” he added.

Total gross borrowings reached P3.2 trillion in the 10 months to October, exceeding the P3-trillion program for 2020. The bulk of the borrowings (82%) were sourced from local creditors.

The government borrows from both local and external sources to plug the budget deficit which is seen to hit 9.6% of gross domestic product (GDP) this year. The fiscal gap has widened as tax collections plunged and spending rose amid the pandemic. — Beatrice M. Laforga with Reuters

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