Firms to be ‘opportunistic’ in tapping bond mart

CORPORATES embarked on US dollar debt deals that received overwhelming demand from investors hungry for Philippine investments, but future issuances in the dollar bond market will be “opportunistic,” an investment bank said.

BDO Unibank, Inc. raised $ 700 million from an offshore dollar bond issue on Aug. 31 before Ayala Corp. followed it up with another $ 400 million in senior notes, the first fixed- for- life corporate debt deal out of Southeast Asia, last week. Both issues were significantly oversubscribed.

“There is strong demand ( as) Philippine issuers are far and few already. Issuers need to have a natural hedge to reduce foreign exchange risk,” BDO Capital and Investment Corp. President Eduardo V. Francisco said in a mobile phone message over the weekend.

Dollar debt deals from the Philippines, one of the fastest-growing economies in Asia, have been scarce. The government is the lone issuer this year, with a $2-billion offer in January.

Corporates have been relying on the domestic fixed- income market and bank lending to support their funding requirements. Year to date, new listings at the Philippine Dealing and Exchange Corp. reached P154.52 billion, 38% higher than the P109- billion value of total listings in 2016 and surpassing its P150- billion target for the entire year.

Corporates are seen to take a “more opportunistic” stance in tapping the US dollar bond market.

“If investors (are) willing to invest at really low spreads then other corporates will consider,” Mr. Francisco said.

Ayala Chief Finance Officer Jose Teodoro K. Limcaoco said in an interview last week the conglomerate tapped the dollar market to refinance maturing dollar-denominated loans and fund future dollar requirements.

“The currency matches,” Mr. Limcaoco said.

“People like to invest in Philippine names and there has been little Philippine names issuing bonds. It’s a testament to what people think of the Philippines,” he added.

The Ayala bonds is the first corporate fixed- for- life with no step- up ( and reset) deal in the Philippines, which means the debt that has no maturity and the interest rate will never change. The principal for this bond will never be repaid to investors, but instead will have a stream of interest payments forever.

“It is a very unique instrument that the issuers has to be high quality and trusted by investors. Forever may be too much of an exaggeration, but you trust that Ayala will be there for a long time,” Mr. Limcaoco said.

Ayala is “done for now” with its fund- raising and is on track to spend the budgeted P185 billion for capital expenditures this year, Mr. Limcaoco said.

The conglomerate announced in June a plan to raise as much as P30 billion through the sale of corporate bonds over a three-year period.