Gov't sells P30.8-billion worth of 10-year bonds

Posted at 11/09/2012 10:43 AM | Updated as of 11/09/2012 5:31 PM

NEW YORK - The Philippines sold P30.8 billion worth of 10-year debt, payable in U.S. dollars, at par on Thursday as part of its debt liability management program. 

The Philippines is seeking to cut its dependence on foreign borrowing by pursuing debt buybacks and swaps. 

The debt, equivalent to $750 million, has a coupon and yield of 3.90 percent. Earlier, IFR, a unit of Thomson Reuters reported Manila had set an indicative price guidance of 4.1 percent. 

The deal drew an order book of over P240 billion or roughly $5.85 billion, sources at the lead managers told Reuters. The deal was done at a currency exchange rate of 41.068 Philippine pesos to the U.S. dollar. 

Ahead of the deal, the market had been prepared for $1 billion worth of debt issued. 

The peso is Asia's best performing currency so far this year, having appreciated nearly 7 percent against the dollar on strong foreign inflows into Philippine stocks and bonds. Further gains are forecast, according to a Reuters poll. 

HSBC, Credit Suisse and Deutsche Bank, Citigroup, JP Morgan, Standard Chartered Bank, Morgan Stanley, UBS, Goldman Sachs have been hired to manage the deal. 

The U.S. Securities and Exchange Commission-registered debt settles on Nov. 26, 2012 and matures on Nov. 26, 2022. 

The new debt offer comes more than a week after Moody's Investors Service upgraded the country's ratings to one notch below investment grade, matching those of rivals Standard & Poor's and Fitch ratings.

Rosalia de Leon, head of the International Finance Group, said the government is looking to buy back a maximum $1.5 billion worth of high-coupon U.S. dollar and euro-denominated debt, and will buy U.S. dollars from the central bank to complete the target repayment amount. 

The central bank has been encouraging the government to tap into its record high reserves of more than $80 billion to help temper the peso's rise. 

The Philippines has sold nearly P98 billion ($2.38 billion) in global peso bonds since September 2010, and remains the only Asian sovereign to offer debt in a synthetic format, issuing in local currency but settling in U.S. dollars. 

It also plans to raise as much as $500 million from the sale of U.S. dollar bonds to local investors to help repay part of the foreign debt of state-run Power Sector Assets and Liabilities Management. 

Through its debt management schemes, the Philippines has narrowed its public debt as a percentage of gross domestic product to 42 percent from 68 percent in 2003. Its interest payments now account for around a fifth of state spending from close to a third in 2005.