PHL raises $2.25B via offshore bonds

US dollar banknotes are displayed in this illustration taken on Feb. 14. — REUTERS

THE PHILIPPINES raised $2.25 billion from its first triple tranche US dollar-denominated bond offering, which included its first-ever green bonds, despite heightened market volatility from the Russia-Ukraine crisis and the start of the US Federal Reserve’s policy tightening cycle.

In a statement on Tuesday, the Bureau of the Treasury (BTr) said it raised $1 billion from the inaugural 25-year green bond offer, as well as $500 million from five-year bonds, and $750 million from 10.5-year bonds.

The Treasury said the new five-year global bonds were priced at 90 basis points (bps) over Treasuries or a coupon of 3.229%. This was after the initial price guidance of 125 bps over the Treasuries area.

The 10.5-year bonds were priced at 3.556% or 125 bps over Treasuries, after the initial guidance of 165 bps over the Treasuries. The 25-year notes were priced at 4.2%, 50 bps tighter than the initial guidance of 4.7%.

“After a few weeks of volatility in the global equity and credit markets, the Republic was able to take advantage of the improving market sentiment (after) the March FOMC (Federal Open Market Committee) meeting,” the BTr said.

The US Federal Reserve last week raised rates by a quarter percentage point, the first time since 2018, to help combat soaring inflation.

The BTr said proceeds from the shorter-term tenors will be used for budget financing, while those from the 25-year global bonds will be used for the government’s sustainable finance program.

“The fact that our debut sustainability bond tranche secured the strongest demand among the three tranches highlights the strong investor confidence in the National Government’s commitment to achieving sustainable development and mitigating climate change, notably the pledge to reduce our greenhouse gas emissions by 75% by 2030,” Finance Secretary Carlos G. Dominguez III said, referring to the country’s first environment, social, and governance global bond offering.

National Treasurer Rosalia V. de Leon said strong investor demand shows the country’s access to international capital markets.

“Being the first and largest offshore Southeast Asia sovereign offering in 2022, the Republic’s transaction has reopened the Asian bond markets for long-dated offerings and cements the Republic’s position as the leading capital market participant in Asia,” she said.

The deal is expected to be settled on March 29. Maturity dates for the five-, 10.5-, and 25-year bonds are on March 29, 2027; Sept. 29, 2032; and March 29, 2047, respectively.

The global bonds were rated “Baa2” by Moody’s Investor’s Service, and are expected to be rated “BBB+” by S&P Global Ratings, and “BBB” by Fitch Ratings.

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.

The deal follows last year’s offshore debt issues by the Philippines including a $3-billion dual-tranche global bonds, the 2.1-billion-euro triple-tranche global bonds, and the 55-billion-yen Samurai bonds.

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. — Jenina P. Ibañez and Reuters