PHL raises P122B from euro bond sale

THE PHILIPPINE government raised €2.1 billion (P122.4 billion) from a triple-tranche offering of euro-denominated bonds, the Bureau of the Treasury (BTr) reported.

The Philippines took advantage of the low interest rates in the euro bond market, as it sold €650 million (P38 billion) worth of four-year global bonds, another €650 million (P47 billion) worth of 12-year notes, and €800 million worth of 20-year debt papers.

Proceeds will be used to support this year’s national budget, as the country continues to struggle to contain the coronavirus disease 2019 (COVID -19) pandemic.

The BTr said in a statement on Thursday total tenders reached €6.5 billion (P379 billion), or three times as much as the initial offer.

This was the country’s biggest and the first long-end euro bond sale ever. It previously issued only three-year, eight-year and nine-year papers.

Broken down, the four-year papers fetched a coupon of 0.25% or 75 basis points (bps) above the tenor’s euro mid swap, the 12-year papers were priced at 1.2% rate or mid swap +105 bps, while the 20-year notes yielded a coupon of 1.75%, 135 bps higher than the euro mid swap.

“All tranches tightened by 25 bps from the initial price guidance backed by a strong order book which allowed the republic to revise its price guidance twice across all three tranches,” the Treasury said.

The bonds will be settled on April 28.

The Treasury’s latest euro bond sale was bigger than the €1.2 billion it raised via the dual-tranche issuance in January 2020, which received €4.3 billion in bids.

“The Philippines’ successful return to the international capital market for the second time this year reflects the investor community’s confidence in the country’s prospects for a strong recovery from the prolonged pandemic, given that its financial readiness has allowed the government to do whatever COVID-19 response measures are necessary to save lives and revive the economy,” Finance Secretary Carlos G. Dominguez III said in a statement.

The latest borrowing was rated Baa2 by Moody’s Investors Service, BBB+ by S&P Global Ratings and BBB by Fitch Ratings.

BNP Paribas S.A., Credit Suisse, Goldman Sachs, JPMorgan, Nomura and Standard Chartered Bank acted as the joint lead managers and joint bookrunners for the issuance.

“The success of this euro deal, being already our fourth offering since the pandemic, serves as affirmation that we are on track to emerge from this crisis as a stronger and more resilient economy. Further, the ability to stretch our maturities to the 20-year tenor at tight pricing underscores that investors are indeed taking a long view on our return prospects,” National Treasurer Rosalia V. de Leon said.

Mr. Dominguez earlier said the country would tap the US bond market soon before “rates skyrocket.”

On March 30, the Philippines raised ¥55 billion (P24.2 billion) from the issuance of three-year Japanese yen-denominated “Samurai” bonds.

The government runs on a budget deficit as it spends more than the revenue being generated to fund programs that will drive economic growth.

It plans to raise P3 trillion this year both from local and foreign sources to plug its budget deficit seen hitting 8.9% of gross domestic product. About P286 billion is estimated to come from global bond issuances. —