PHL raises $2B from dollar bonds

THE MARCOS administration raised $2 billion (P118 billion) from its first dollar bond issuance, the Bureau of the Treasury (BTr) said.

The BTr sold $500 million worth of five-year bonds priced at 5.17% or US Treasuries plus 120 basis points (bps). It also sold $750 million worth of 10.5-year bonds with a yield of 5.609% or US Treasuries plus 185 bps.

This is “35 bps tighter than an initial pricing guidance of US Treasury plus 155 and 220 bps area, respectively,” it said in a statement.

The BTr also raised $750 million from the issuance of 25-year sustainability bonds, priced at 6.1%.

“Despite the ongoing weakness in global credit markets amid high inflation and rising US interest rates, the republic was able to navigate volatile market conditions and successfully price the global bonds,” the Treasury said.

It noted the bond issuance, which is expected to be settled on Oct. 13, reflected “strong investor appetite globally for the republic.”

“The strong demand for our first international bond offering under President Marcos’ administration demonstrates investor confidence in the new government and the administration’s six-year plan of economic transformation to a more inclusive, resilient, and prosperous economy,” Finance Secretary Benjamin E. Diokno said in the statement.

The dollar bonds were rated “Baa2” by Moody’s Investors Service, “BBB+” by S&P Global Ratings, and “BBB” by Fitch Ratings.

Proceeds of the bonds will be used for general budget financing, as well as the financing/refinancing of assets in line with the Philippines’ sustainable finance framework.

“The success of this transaction is an indication of the Philippines’ readiness to brave choppy waters in pursuit of excellent results,” National Treasurer Rosalia V. de Leon said in the same statement.

BofA Securities, Goldman Sachs, HSBC (B&D), JPMorgan, Morgan Stanley, SMBC Nikko, Standard Chartered Bank, and UBS were tapped as joint bookrunners. The latter two were designated as sustainability structuring banks.

Earlier this year, the government raised $559 million from a yen-denominated Samurai bond issue in April, and sold $2.25 billion worth of dollar-denominated notes in March.

The Philippine government will borrow from local and external sources, at 75-25 mix favoring the former. This will help fund a budget deficit capped at P1.65 trillion this year, equivalent to 7.6% of the gross domestic product (GDP).

The National Government’s outstanding debt rose to a record P13.02 trillion at the end of August due to additional domestic borrowings and a weak peso.

As of the second quarter, the Philippines’ debt-to-GDP ratio was at 62.1%, above the 60% threshold deemed sustainable for developing countries. Still, the government intends to bring it down to 52.5% by 2028 by letting growth outpace debt. — D.G.C.Robles