Philippines sees heavy demand in $1.5-B global bond sale

Posted at 01/10/14 2:58 PM

MANILA - The Philippines raised $1.5 billion from its first global bond sale after more than a year of absence from the offshore debt market, and the issue could be the last for 2014 as it looks to other sources of funds to meet its requirements for the year.

Only $500 million of the amount raised will be used to bridge the government's shortfall this year, National Treasurer Rosalia De Leon said on Friday, with the $1 billion to be used to buy back buy back outstanding bonds.

Manila has penciled-in foreign debt issues of $1 billion for this year's borrowing program, but De Leon said the plan could change and the government may instead rely on official development loans, or local debt to cover its funding needs.

"If we need an additional $500 million, it does not have to be sourced offshore. It can be onshore, or we can also tap multilateral loans," De Leon said, adding savings from the buy back scheme could also be used to augment public funds.

The government plans to borrow a total of P715 billion ($16.01 billion) in 2014 to bridge a budget gap seen at 2 percent of gross domestic product (GDP), but the amount could increase to 730 billion pesos to reflect financial assistance from development partners for reconstruction work in areas devastated by a super typhoon last year.

"We are very pleased with the transaction as we were able to meet our objectives of reducing our funding cost and extend our maturities as well," De Leon told Reuters.

"This is all in line with our thrust to improve our debt structure so we can channel our resources away from debt servicing to more productive use, like our reconstruction efforts," De Leon said.

Orders exceeded the issue size of $1.5 billion by more than nine times, with total bids for the 10-year US dollar- denominated bonds on offer reaching $14 billion, De Leon said, spurred by investors' confidence in one of the fastest growing economies in Asia.

The sovereign bonds were sold at a coupon of 4.20 percent, lower than the indicative guidance of 4.50 percent.

Deutsche Bank, HSBC and Standard Chartered were global coordinators of the issue and were also joint bookrunner along with AN, Citigroup, Goldman Sachs, J.P. Morgan and Morgan Stanley.

The Southeast Asian economy is seeking to cut its dependence on foreign borrowing by pursuing debt buy backs and swaps, and innovative deals such as local-denominated global bonds, a move that has been praised by credit rating agencies.

Ratings agencies Fitch Ratings, Standard & Poor's and Moody's raised the Philippines to investment grade last year, citing among others the government's improving public finances.