Philippines returns to offshore debt market

THE PHILIPPINE government is tapping the offshore debt market for a second time this year via a triple-tranche offering of US dollar global bonds amid improving global sentiment.

The Bureau of the Treasury (BTr) on Tuesday announced it was offering five-and-a-half-year, 10-year and 25-year US dollar bonds.

The initial pricing guidance was 85 basis points (bps) above US Treasuries for the five-and-a-half-year tranche, and 125 bps over US Treasuries for the 10-year bonds.

The BTr said the 25-year offering will be a tap of the existing 5.75% 2051 US dollar bonds that were issued in January. The pricing for these bonds was set at 6.1%.

“The National Government remains committed to fostering strong and inclusive socioeconomic growth. This transaction highlights our continued pursuit of prudent fiscal management and our broader development agenda. Against the backdrop of encouraging developments in global markets, we are confident that our policy direction will continue to be well received by the international investment community,” Finance Secretary Frederick D. Go said in a statement.

The BTr said the transaction will be priced during the New York trading session on Tuesday, while settlement will be on June 24.

Proceeds from the bonds will be used for general budget financing, it added.

“The republic’s return to the international capital markets comes at an opportune time, amid improving market sentiment and favorable global developments. This transaction reflects our prudent and proactive approach to financing, allowing us to secure funding efficiently while supporting the National Government’s priority programs and development objectives,” National Treasurer Sharon P. Almanza said.

The government was able to time the issuance while yields are lower, a trader said in a text message, noting they could potentially raise up to $3 billion from the offering.

“The 25-year 2051 series is actually performing close to its coupon rate, so that means the government is issuing this at prewar yield level,” the trader added.

Moody’s Ratings on Tuesday gave the global bonds a rating of Baa2 in line with the country’s sovereign rating.

“According to the terms and conditions available to us, the bonds to be issued under the shelf program will constitute direct, unconditional and unsubordinated obligations of the government of the Philippines the issuer. The bonds will rank pari passu with all of the issuer’s current and future senior unsecured external debt obligations,” the debt watcher said in a note.

The bonds are also expected to be rated BBB+ by S&P Ratings and BBB by Fitch Ratings.

BNP Paribas, Citigroup, HSBC (B&D), JPMorgan, MUFG, and Standard Chartered Bank were mandated as joint lead managers and bookrunners for the transaction.

Ms. Almanza previously said they were looking to return to the offshore debt market within the second quarter to raise the remaining $2.5 billion in the government’s foreign borrowing program.

In January, the government raised $2.75 billion from a triple-tranche dollar bond issuance. It raised $500 million from 5.5-year bonds at a coupon rate of 4.25%, $1.5 billion from the 10-year paper at a coupon rate of 5%, and $750 million from the 25-year debt at a 5.75% coupon. — Aaron Michael C. Sy