Philippines raises $1.5B from global bond sale

The Philippines raised $1.5 billion from the sale of global bonds on Wednesday, with investors snapping up Asia's first international bond offer for the year. Manila reopened its 6.5-percent global bonds due in January 2020 and its 6.375-percent global bonds due in October 2034. The sale comprised a $650-million reopening of the 2020 bonds, bringing their total size to $1.4 billion; and an $850-million reopening of the 2034 bonds, bringing their total size to $1.85 billion. “We are pleased with the strong interest shown by investors in this bond issue as this reflects continued confidence in Philippine debt papers," Finance Secretary Margarito Teves said on Thursday. The proceeds of the bond sale, he added, would help fund infrastructure and reconstruction efforts following the devastation brought by recent typhoons. “The transaction was heavily oversubscribed, highlighting the continued global investor support and allowing us to raise a full $1.5 billion across both tranches," National Treasurer Roberto Tan said. He said the bond sale would further deepen the liquidity of the existing bonds and extend the duration of the country’s borrowings. The newly issued bonds were priced at 106.25 percent and 96.5 percent, respectively. The 2020 bonds yielded 5.674 percent or an equivalent 183.7 basis points (bps) over benchmark US Treasuries, while the 2034 bonds yielded 6.664 percent or an equivalent 195.7 bps over benchmark US Treasuries. Twenty-three percent of buyers of the 2020 debt paper came from the Philippines, a quarter from the rest of Asia, 35 percent from the US and 17 percent from Europe, Teves said. For the 2034 bond, 19 percent came from the Philippines, 21 percent from the rest of Asia, 40 percent from the US and 20 percent from Europe. Barclays Capital, Deutsche Bank Securities, Inc. and HSBC acted as joint lead managers and joint bookrunners for the transaction. Global bonds rated Global debt watcher Standard and Poor’s Ratings Services (S&P) rated the global debt BB-, while Moody’s Investors Service gave it a Ba3, both in line with the Philippines' sovereign rating. S&P cited the country’s strong foreign exchange reserves, hot money and foreign direct investments, adding that its improving liquidity position continues to lower the risk of its inability to pay. Moody's, for its part, said its rating reflected the Philippines' fortified payment position and a relatively sound and liquid banking system. Both debt raters, however, warned that the country's widening budget deficit due to anemic revenues posed a risk. Last week, the Bangko Sentral ng Pilipinas (BSP) approved the government’s plan to sell about $1.5 billion in dollar bonds and $1 billion in yen-denominated bonds. The government needs to raise about $2 billion to cover its foreign borrowing requirements this year. It has secured a portion of this amount after it sold $1 billion in 25-year global bonds in October. It also needs to refinance 650 million euros in debt falling due on Feb. 22 and $561.5 million in debt maturing in March. The government needs to borrow from the global debt market to plug a swelling budget gap, brought about by poor tax collections, inability to sell state assets and the need to spend on reconstruction following the devastation left by typhoons Ondoy and Pepeng. Poor tax collections and unrealized gains from the sale of government assets led to a P6.4-billion budget deficit in November and a worse-than-projected gap of P272.5 billion for the 11-month period. — GMANews.TV