ADB ready to launch more peso bonds

The Asian Development Bank (ADB) is ready to sell more peso-denominated zero-coupon bonds should there be additional demand for peso loans in the country.

ADB country director for the Philippines Tom Crouch said that the P2.5 billion zero-coupon bond launched last Friday could have been launched two years ago.

The P2.5 billion peso-denominated bond was the fifth in the region in collaboration with the ADB. The earlier successful bond floats were in India, Malaysia, the People’s Republic of China, and Thailand.

"Like the original concept, we helped launch the Philippine zero-coupon bond to protect the Philippines and other Asian countries from foreign exchange shocks," Crouch said.

The P2.5 billion bond was over-subscribed from purchases by institutional investors in the Philippines such as banks, insurance companies and trust funds.

The ADB is selling local currency bonds so it can use the proceeds to lend to government and companies in these countries, helping the borrowers avoid foreign exchange risks.

"The bond issue underscores ADB’s confidence in the Philippine domestic capital market, and that it could facilitate issuance by other non-resident borrowers in the country," ADB vice president for finance and administration Khempheng Pholsena said.

The issue, priced at 65.31 percent, has a bullet maturity of five years and one day. The sole lead manager and sole bookrunner of the issue is HSBC. It has an implied yield of 8.7 percent per annum and were priced at a spread of six basis points over the five-year tax-adjusted MART1 rate.

The proceeds of the bond issue will be used for a peso-denominated loan to Balikatan Housing Inc. (BHI), a special purpose vehicle jointly-owned by National Home Mortgage Finance Corp. (NHMFC) and Deutsche Bank. Zero coupon bonds are sold at a discount to face value. The difference between the discounted price and the face value paid at maturity represent the return to the holders of the debt securities.