PH hires banks for US bond offer

The Republic of the Philippines is heard to have hired six banks for a potential offering of US dollar bonds early next year, according to a market source.

The six are Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, Standard Chartered Bank and UBS, though the Baa2/BBB/BBB rated sovereign has yet to confirm the mandate.

However, National Treasurer Rosalia de Leon said the sovereign plans to head for the market early next year to sell global dollar bonds.

In January, the Philippines raised $2 billion from 25-year dollar bonds at 3.75 percent.

The size and the tenor of the upcoming offering are expected to be similar to the January 2017 trade, according to the source.

Last week, Fitch upgraded the Philippines to BBB from BBB– in a major agency’s first upgrade for the sovereign since 2014, citing consistent macroeconomic strength.

Earlier, Deputy National Treasurer Erwin D. Sta. Ana said the Philippine government was planning to sell $1 billion in global bonds in the “early part” of next year, which would come in with a swap offer for maturing debt papers.

Sta. Ana said the government was preparing for a bond sale transaction, noting they are in the process of securing approvals from the US Securities and Exchange Commission (SEC).

“We are actually preparing for an ROP [Republic of the Philippines] transaction early part of next year, but of course we are still undergoing the usual approval and securing those approvals,” Sta. Ana said.

“We have to content with the US SEC again we would have to wait for those to come to fruition,” he added.

The treasury official noted the planned $1-billion bond sale will be purely “new money.”

Meanwhile, Finance Secretary Carlos G. Dominguez III said proceeds from the offshore bond sale will be used to support the Duterte administration’s ambitious infrastructure program.

“You know infrastructure spending is accelerating as announced earlier, we are already 11 percent more than last year, so we expect this acceleration to continue next year,” Dominguez said.

As early as now, Dominguez said the government received “many offers” from foreign banks to handle the forthcoming transaction of the Philippine government.

“I forgot the number of banks now, but they have also been talking to the brokers both east coast and west coast. We’re having so many offers right now — another European bank just came to us. It looks like we’re if not flavor of the month, flavor of the quarter, there’re several offers,” he said.

In a related development, Sta. Ana said the government was now studying “several proposals” from banks for the planned sale of Samurai bonds.

“We’ re looking at several proposals coming from banks and we are still looking at the optimal structure, we are currently studying the Samurai issuance. Both from the banks and investors side, we’re receiving positive feedback for an issuance,” Sta. Ana said.

Asked when the government plans to issue Sumarai bonds, the Treasury official said “nothing is certain at this point but we are looking at 2018 as a possible window for this issuance.”

“At this stage we are still looking at some proposals and some available structures so we haven’t really started,” he said.

Dominguez said the government is keen on issuing renminbi-denominated bonds and global bonds next year to prepare for the administration’s spending program in 2018.

Despite this, the finance chief assured the government is keeping its borrowing mix at 80:20 in favor of the domestic market.

Treasury data showed that of the R888.1 billion in gross borrowings programmed by the government for 2018, 80.2 percent or 711.8 billion will be sourced locally or from the sale of treasury bills and bonds.

The remaining 19.8 percent or R176.3 billion, equivalent to $3.456 billion, will be borrowed from external sources. (Reuters with Chino Leyco)