PHL raises $2.35B from bond sale

THE Philippines raised $2.35 billion from its dollar-denominated bond sale as it seeks to beef up state coffers, fetching a low coupon amid strong demand and despite caution across the globe due to the pandemic.

In a statement, the Bureau of the Treasury (BTr) on Tuesday said it sold $1.35 billion in 25-year dollar-denominated global bonds, and $1 billion in 10-year dollar bonds, marking its second offshore issuance this year.

The offer was met with strong demand after total bids reached $10.5 billion for the two tenors, National Treasurer Rosalia V. de Leon said in a mobile phone message on Tuesday.

This was more than seven times the initial offer of a benchmark-sized issue worth $500 million to $700 million per tenor.

The new 10-year dollar-denominated global bonds were priced at US Treasury spreads of T+180 basis points (bps), or a coupon of 2.457%, while the 25-year bonds were quoted at 2.95%.

Ms. De Leon said the rates fetched were the “lowest ever coupon” for a benchmark issuance of both tenors.

“The transaction was able to achieve the Republic’s lowest ever coupon for a 10- and 25-year benchmark issuance amidst no less than an environment gripped with pandemic fear. This makes the Philippines, at least for the time being, a diamond in the sovereign issuance space for we were able to convert immense pressure into an opportunity to dazzle in brilliant shine,” Ms. De Leon was quoted as saying in the BTr statement.

The Treasury said proceeds of the fundraising activity will be used for “general purposes, including budgetary support.”

Finance Secretary Carlos G. Dominguez III said the strong demand for the issue showed the “resiliency” of investor confidence in the economy amid the coronavirus disease 2019 (COVID-19) pandemic.

“Such support from the investor community is a result of the continued strong macroeconomic fundamentals of the country brought about by the reform agenda of the Duterte administration,” Mr. Dominguez said in the statement.

The BTr said the issuance announced on Monday capitalized on a “short favorable market window amid broader volatility” in the global markets.

The papers will be settled next week, May 5.

Debt watcher S&P Global Ratings on Monday assigned a “BBB+” long-term foreign currency issue rating to the issue, while Moody’s Investors Service assigned senior unsecured ratings of “Baa2” to the dollar-denominated bonds maturing in 2030 and 2045. Fitch Ratings gave the bonds an expected rating of “BBB(EXP).” These are at par with their assessments on the sovereign.

Sought for comment, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said the timing of the issuance was “very much favorable” after benchmark yields offshore eased to record low levels, “thereby enabling the Philippine government to borrow at a very low interest rates and puts it in a good position to save so much on borrowing costs.”

“Any additional US$ or other foreign currency bond issuance by the Philippine government in the coming months remains possible to finance the increased government spending and increased budget deficit spending for the various stimulus measures and other COVID-19 programs, as an immediate and quick source of funding at relatively low borrowing costs near record low levels,” Mr. Ricafort said via e-mail on Tuesday.

The joint bookrunners for the transaction include Citigroup, Inc., Credit Suisse Group AG, Goldman Sachs (Asia) L.L.C./Morgan Stanley, Standard Chartered Bank and UBS Group AG, according to Bloomberg.

The latest issuance followed the January issue where the BTr raised €1.2 billion from two tenors of euro-denominated bonds out of €4.3 billion in bids.

Broken down, the government raised €600 million each for three-year and nine-year papers. The bonds carry coupon rates of 0.1% for the three-year bonds and 0.7% for the nine-year papers, a spread of 40 bps and 70 bps over benchmark rates, respectively.

The last time the Treasury tapped the dollar bond market was in January 2019 when it sold $1.5 billion in 10-year global bonds priced 110 bps above benchmark rates. — Beatrice M. Laforga