RMB 6-B multi-tranche ‘panda’ sale eyed

THE PHILIPPINES is looking to sell about 6 billion renminbi worth of bonds in several tranches over the next two years, after it signed a memorandum of understanding (MoU) with China providing for its return to the “panda” debt market, the Department of Finance (DoF) said in a statement on Wednesday.

Finance Secretary Carlos G. Dominguez III and Bank of China (BoC) chairman Chen Siqing signed the MoU on “panda” bond issuance on Monday, as part of the 29 agreements signed during the first day of China President Xi Jinping’s two-day state visit to Manila on Tuesday.

The DoF said the panda bond MoU provided a “general framework to facilitate cooperation between the DoF and the Chinese bank (BoC) on future issuances by the Philippines of renminbidenominated ‘panda’ bonds in the Chinese debt capital market.”

“The MoU covers the Philippines’ plan to return to the China Interbank Bond market in 2019, with a possible application for a multitranche RMB 6-billion bond issuance,” the DoF said.

National Treasurer Rosalia V. De Leon told reporters after Wednesday’s Treasury bond auction that the framework covers the Philippines’ registration with Chinese authorities that allows the former to sell offshore debt papers over the next two years.

She said that the government is looking at offering tenors in “three and five” years.

“Either we avail everything or staggered, depends on market appetite We’ll see kasi depending on the rates at that time and our requirements, so we just provided for RMB 6 billion for the next two years…,” said Ms. De Leon.

“But if market conditions are not really favorable to us, we have the option to issue in 2020.”

The Philippines’ conducted its maiden renminbi bond sale in March where it raised RMB 1.46 billion, or about $230 million, in threeyear debt papers. The BoC served as one of the lead underwriters for that exercise.

The issuance was successful as bids reached more than six times the government offer, bringing the coupon to the low end of the 5.005.60% price guidance — signaling strong investor confidence towards the Philippines.

The BoC was also among 13 other banks that led the establishment of the Philippine renminbi trading community, which put in place a direct currency conversion platform for the Philippine peso and the Chinese renminbi which is aimed at reducing costs and easing volatility in the peso-dollar exchange market.

The side from being the lead underwriter for ‘panda’ bonds, BoC also acts as the Philippines’ joint global coordinator for its upcoming global dollar bond transaction, according to the DoF.

The Philippines is also looking at returning to the yen-denominated “samurai” bond market and the euro debt market next year, as it is seeking to diversify its funding sources.

The government has programmed a 65-35 ratio in its borrowing plan for this year in favor of domestic sources, and 75-25 for 2019-2022 with local lenders still taking the larger share. —