Manila raises $1bln in bonds
The Philippines, one of Asia’s most active sovereign debt issuers, sold $1 billion in 25-year global bonds, its third sale this year, attracting solid demand within hours of its opening on Friday. The 6.375 percent bonds maturing on Oct. 23, 2034 were priced at 99.382 to yield 6.425 percent, below the earlier indication of around 6.5 percent.
The final yield was 216.5 basis points over comparable U.S. Treasuries. The bond attracted orders of around $5 billion, the government said, allowing the Southeast Asian country to raise the deal size to $1 billion, the upper end of the earlier $750 million-$1 billion range. “We are very pleased to have been able to extend the republic’s maturity profile while at the same time achieving the lowest yield for a new 25-year benchmark US$ global offering by the Philippines,” Finance Secretary Margarito Teves said in a statement.
Nearly two-fifths of the country’s first 25-year bond offer since January 2007 was taken up by U.S. investors, while a fourth was allocated to Philippine investors. One-fourth was taken up by other Asian investors and the rest, or 13 percent, from Europe. “They have not left a lot on the table but the Philippines always has high demand and they have been road-showing extensively for weeks and weeks,” said a London-based fund manager.
”The curves are crowded at the front end and issuers want to lock in low finance for a long period,” he said, referring to the new 2034 bonds which will be Manila’s longest dated global bonds. The Philippines mandated UBS, HSBC and Deutsche Bank to handle the deal. The country sold $1.5 billion in 2019 bonds at 8.5 percent in January and $750 million 2020 bonds at 6.625 percent in July.
FINANCING FOR 2010
Standard and Poor’s has rated the deal BB-minus, Fitch Ratings has assigned a BB rating and Moody’s Investors Service has rated it Ba3. “Positive investor reception for this transaction allowed us to resume our long-term borrowing strategy to achieve our funding objective in support of our fiscal programme,” Philippine National Treasurer Roberto Tan said in the same statement.
Manila wants to secure financing for its 2010 budget deficit ahead of presidential polls in May, with markets likely to be edgy about policies to be pursued by the new administration. This political uncertainty, and a record high deficit due to a slowing economy and reconstruction costs after typhoons, are starting to cause unease. “It is a bit worrying that the fiscal deficit number gets revised up multiple times, with continued disappointment in revenue collection,” said Nomura International’s Hong Kong-based credit analyst Yang-Myung Hong. “Hence, the medium-term trend remains uncertain, especially given next year is an election year with added political uncertainty,” he said. Teves said on Wednesday the government was keen to tap the overseas debt market to pre-fund some of its 2010 foreign debt needs of around $2 billion.
