Philippines raises $1.5 B from global bonds

Posted at 01/11/2014 9:19 AM | Updated as of 01/11/2014 10:18 AM

MANILA, Philippines - The Philippines raised $1.5 billion through a sale of 10-year global bonds with investors snapping up the country’s first dollar issuance as a full-fledged investment grade credit.

According to the Department of Finance, the issue attracted bids worth more than $13.5 billion from about 500 investors.

The huge demand helped the Philippines snag a yield of 4.2 percent for the bonds due 2024.

The country, which won investment grade ratings from three of the world’s major credit ratings agencies for the first time in 2013, allocated 53 percent of the 10-year notes to investors based in the US, 28 percent to investors in Asia and 19 percent to investors in Europe.

Around 71 percent of the notes was sold to fund managers, 24 percent to banks, and five percent to insurers.

This transaction is the country’s first international debt issuance since January 2012. It coincided with a one-day tender offer for 11 series of dollar denominated bonds maturing between 2015 and 2025.

The tender offer was primarily targeted at existing bondholders to switch into the new 10-year global bonds. About $870 million in bonds were offered by investors for exchange into the new global bonds and this was accepted by the government.

This liability management transaction also marks the first intraday switch tender offer in Asia, evidencing the country’s sophistication as a sovereign issuer.

Commenting on the successful bond issuance, Finance Secretary Cesar V. Purisima said: “We welcome this opportunity for the Republic to revisit the international markets, to herald its investment-grade status and establish a reference for the country’s credit.

This exercise again demonstrates sustained government efforts to reduce the country’s debt burden and to channel more resources into productive endeavors.”

National Treasurer Rosalia De Leon, for her part, said the fund-raising activity was “in line with the government’s overall objectives of prudent and proactive liability management, and resulted in interest-cost savings as well as extended the average debt maturity profile of the Philippines.”

“The result further bolstered the strength of the government’s financial position,” De Leon added.

Joint global deal managers and coordinators for the bond offering were Deutsche Bank, HSBC, and Standard Chartered Bank. ANZ, Citi, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, and Standard Chartered Bank served as joint bookrunners.

Proceeds from the bond issue will be used to fund the exchange offer as well as for general purposes including budgetary support.

For this week alone, Asian economies (including the Philippines) raised a total of $6.5 billion from sale of dollar-denominated debts. Indonesia sold $1.5 billion worth of five-year Islamic bonds at the highest rate since 2009 while Sri Lanka issued $1 billion of five-year bonds at a 6 percent yield last Jan. 6.