Gov’t sells $1.5 billion in global bonds

THE PHILIPPINES sold $1.5 billion in 10-year offshore dollar bonds — priced 110 basis points (bps) above benchmark US treasuries and tighter than an initial 130 bps guidance — in an exercise which Finance officials said reflected investor confidence in the country.
“The Republic of the Philippines (ROP) successfully returned to the international capital markets with its offering of $1.5 billion of 10-year global bonds. The newly issued global bonds were priced at US Treasury spreads of T+110 bps after an initial pricing guidance of T+130 bps area,” the Bureau of the Treasury (BTr) said in a statement e-mailed to journalists on Tuesday.
About 37% of the bonds were allocated to Asia, 35% to Europe, and 28% to the United States, according to the BTr.
Bulk of the ROP bonds, or 52%; went to asset managers; 22% went to banks; 14% to sovereign wealth funds, pension funds and insurance; as well as 12% to private banks and other type of investors.
The debt notes are rated a notch above minimum investment grade at “BBB” by S&P Global Ratings and Fitch Ratings, and “Baa2” by Moody’s Investors Service.
The notes will be settled on January 14.
Funds raised will be used for “general purposes, including budgetary support.”
The government said that it timed the issuance to gain favorable terms, being the first emerging market economy to offer offshore dollar bonds.
“Capitalizing on the recent positive markets trading tone post the strong US employment data release on Friday, the Republic opportunistically announced the issuance on Monday, Jan. 7, 2019. The issuance marks the first EM sovereign USD bond issuance in 2019 and demonstrates the Republic’s ability to respond tactically to conducive market conditions to capture a favorable issuance window,” the BTr said.
INVESTOR CONFIDENCE
The offering attracted $4 billion in demand and signals investor confidence in the Philippines, National Treasurer Rosalia V. de Leon told Reuters.
Finance Assistant Secretary Antonio Joselito G. Lambino II said the tenders were more than double the offer size. “The Bureau of the Treasury priced the Philippines’ $1.5 billion, 10-year USD Global bond at 110 bps over US Treasuries, and an all-in yield of 3.75%. The issue garnered strong demand as the order book peaked at $4 billion,” Mr. Lambino said in a mobile phone message.
Finance officials said the positive result of the country’s first debt sale to foreign investors this year comes amid increased volatility in global markets.
“This transaction further illustrates deepening investor confidence in the Philippines’ growth story and the Duterte administration’s ability to maintain fiscal discipline while spending big on infrastructure modernization, human capital development and social protection for the poor,” Finance Secretary Carlos G. Dominguez III said in a statement.
The same press release quoted Ms. De Leon as noting: “We have garnered strong support from the global fixed-income investor community despite recently heightened volatilities in the global markets.”
“This demonstrates strong conviction from the global investor community on the Republic’s economic fundamentals as well as the depth of the Republic’s investor outreach.”
Bank of China, J.P. Morgan, and Standard Chartered Bank acted as Joint Global Coordinators for the transaction, while Citigroup, Credit Suisse, Goldman Sachs (Asia) L.L.C., and UBS acted as joint bookrunners for the transaction.
The government plans to borrow up to P1.19 trillion this year, with a 75-25 borrowing mix in favor of local creditors.
The administration of President Rodrigo R. Duterte seeks to spend P8-9 trillion throughout its six-year term ending in mid-2022 to boost economic growth to 7-8% annually by then from a 6.3% average in the six years of its predecessor.
The Finance department has said that it also plans to return to other offshore bond markets through renminbi-denominated “Panda” bonds and yen-denominated “Samurai” bonds 12-18 months after their previous issuance in March and August 2018, respectively. It is also exploring to tap bond markets in Europe. — Elijah Joseph C. Tubayan