PHL returns to offshore bond market

THE PHILIPPINE government is looking to raise funds via a benchmark-sized US dollar-denominated bond issue with tenures of five, 10.5 and 25 years, according to a government document seen by reporters on Monday.

The borrower has opened orders for a five-year bond at the 125 basis points (bps) over Treasuries area, a 10.5-year note at the 165 bps over Treasuries area and a 25-year bond at the 4.7% area, the document showed.

Proceeds from the two shorter-term issues will be used for budget financing, while the 25-year bond offer was specifically intended to raise money for the government’s “sustainable finance framework” program.

The settlement date is March 29. The size of the offering is set at the US dollar benchmark.

National Treasurer Rosalia V. de Leon declined to comment on the issuance.

Finance Secretary Carlos G. Dominguez III last month said the Finance department had been in talks with banks on a $500-million green bond offering.

Funds raised from green bonds are used for climate change mitigation and environmental projects. The country’s sustainable finance framework seeks to harness public and private investments to support the transition to a clean, sustainable and climate-resilient economy, Mr. Dominguez said.

The maturity dates for the five-, 10.5-, and 25-year bonds are March 29, 2027; Sept. 29, 2032; and March 29, 2047, respectively.

For this three-tranche offering, the Bank of China, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Mizuho Securities, Morgan Stanley, Standard Chartered and UBS are joint lead managers and bookrunners.

Moody’s Investors Service assigned senior unsecured ratings of “Baa2” to the Philippines’ dollar-denominated global bond offerings. This mirrors the “Baa2” credit rating with a stable outlook for the Philippines given by Moody’s in July 2020.

Fitch Ratings last month kept the Philippines’ investment grade “BBB” rating, but maintained the “negative” outlook. S&P Global Ratings kept the country’s “BBB+” rating with a stable outlook in May last year.

“The government still needs to fund the relatively wider budget deficit since the pandemic started in 2020,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said via Viber.

“(The pandemic) reduced the government’s tax revenue collections especially since the lockdowns and the relatively slower recovery thereafter.”

The Philippines, one of Asia’s most-active sovereign debt issuers, is looking to raise P2.2 trillion ($42 billion) to plug its budget deficit this year, about 75% of which is to be sourced from the domestic market.

As of the end of last year, the government recorded P11.73 trillion in outstanding debt, up by 19.7% year on year. Foreign borrowings represented just over 30% of the total.

This meant the debt-to-GDP ratio is now at 60.5%, higher than the 54.6% a year earlier and slightly above the 60% threshold considered as manageable by multilateral lenders for developing economies.

Mr. Dominguez previously said he expects the debt-to-GDP ratio to moderate by the end of 2022 or in 2023 as the economy expands and tax collections grow. — Reuters with Jenina P. Ibañez