THE PHILIPPINES raised 2.5 billion renminbi ($363.3 million) from its second sale of so-called “panda” bonds that saw strong demand from investors, the Treasury bureau and the Bank of China, sole underwriter for the exercise, announced in separate statements.

In a statement sent to reporters late on Wednesday, the Bureau of the Treasury said the three-year debt papers fetched a 3.58% coupon that represented “a tight spread of 32 basis points above the benchmark.”

The order book reached a total of some RMB11.25 billion — resulting in the issue being 4.5 times oversubscribed, according to the Bank of China — “reinforcing a strong vote of confidence in the Republic’s economic stewardship and transformative reform agenda,” the Treasury said.

“The success of the second ‘panda’ bond float, which has come on the heels of the similarly well-received float of Euro-denominated offshore securities, illustrates the high level of confidence of the international markets in the Philippines amid… game-changing reforms… to sustain its upward growth trajectory and attract more investments,” the Treasury quoted Finance Secretary Carlos G. Dominguez III as saying.

“Such confidence by the global investor community stems from our solid creditworthiness brought about by the government’s unwavering commitment to sound macroeconomic policies and fiscal discipline in the face of domestic and external challenges.”

S&P Global Ratings last April 30 raised the Philippines’ credit rating by a notch to “BBB+” — its best debt score yet — citing above-average growth and strong external and fiscal position which have boosted the country’s economic profile. Fitch Ratings, Inc. and Moody’s Investors Service have kept the country’s rating a notch above minimum investment grade at “BBB” and “Baa2”, respectively, while China Linahe Credit Rating Company Ltd has given the Philippines its highest rating of “AAA”.

The same Treasury statement quoted National Treasurer Rosalia V. De Leon as saying: “The success of our ‘panda’ bonds issuance, along with other recent issuances, resonates the positive market sentiment on Philippine credit.”

“Through strategic and timely offerings, we are able to tap various markets even in a challenging environment that allowed for the Republic that resulted in more cost-efficient pricing.”

Noting in a separate statement that “the Philippines is… becoming a strong player in this… ‘panda’ bond market, largely due to its improved creditworthiness”, Deng Jun, country head of Bank of China Manila, said the sale’s“overwhelming success” serves “our two countries’ shared vision of improving infrastructure and providing better opportunities for Filipino and Chinese businesses.”

In terms of geographic breakdown, Chinese investors accounted for 42.4% of placements while those elsewhere accounted for 57.6%.

Bank of China said Hong Kong was the biggest source of accepted bids, accounting for RMB1.26 billion, followed by China (RMB1.06 billion), Europe (RMB140 million RMB) and in the Philippines (40 million RMB).

The Philippines made its first foray into the “panda” bond market in March 2018, raising RMB1.46 billion ($230 million) in three-year papers with a five percent coupon after an offer that was 6.32 times oversubscribed.

Last week, the government raised €750 million in eight-year global bonds with a 0.875% coupon and priced 70 basis points over benchmark. That offer involved the first euro-denominated bonds issued by the Philippines in more than a decade.

The Philippines also sold $1.5 billion in 10-year offshore dollar bonds in January.

The Philippines, one of Asia’s most active sovereign bond issuers, plans to borrow P1.189 trillion this year, 75% of which will be sourced domestically while the balance will be from foreign creditors. Funds will be used to fund a budget deficit programmed at P624.4 billion, equivalent to 3.2% of gross domestic product, and support increased government spending programmed at P3.774 trillion.

The government is also looking at offering “samurai” bonds amounting to $1-1.5 billion in yen equivalent some time next semester, as well as another round of dollar-denominated global bonds. — Karl Angelo N. Vidal

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