RP eyes $1.5B from bond offer

The Philippines will likely raise as much as $1.5 billion from a 10-year dollar bond offer it launched yesterday with brisk demand for the first offshore sovereign issue in Asia this year.

The issue would be a key test of investors’ appetite for new risk in Asia, and could prompt other regional sovereign issuers to tap the market in the coming weeks.

The Philippines is rated B1 by Moody’s Investors Service, BB minus by Standard and Poor’s and BB by Fitch Ratings.

Credit Suisse, Deutsche Bank, and HSBC Holdings are said to be the lead managers for the proposed offering.The official price guidance for the offering is expected to be issued when markets open for trading in New York.

Last year, the country raised $500 million when it reopened its existing 2032 bond, its sole bond offering in 2008.

In all of 2009, the Philippines plans to raise $2.6 billion in new foreign debt. In addition to the $1.5 billion in bonds the Philippines aims to sell, it intends to raise another $1.1 billion in loans from multilateral lenders such as the Asian Development Bank and the World Bank.

The borrowing will help finance a budget deficit of P102 billion in 2009 amid an economic slowdown.

“It seems like a good issue, and demand is pretty good,” said Benedicto Jose Arcinas, vice president and treasurer at Export & Industry Bank.

“I think they can offer $1.5 billion given the demand.” “We ourselves put in a larger bid than usual,” Arcinas said.

The indicative yield quoted by the market offered a “decent premium” over the existing Philippine 2019 bond, a trader said.

Yields on the Philippines’ 10-year bonds, with a coupon rate of 9.875 percent and due in January 2019, were steady at 8.4 percent in the secondary market, one trader said.

The Philippines has said it wants to cover much of its 2009 overseas commercial borrowing needs in the first quarter.

“We have already launched the offer,” National Treasurer Roberto Tan said. “Proceeds will be used for government budget expenditures,” he said.

A source close to the deal said the offer could be about $1 billion, but Tan said the decision on the offer size would depend on market appetite.

Analysts have said the Philippines could be looking to raise funds to to refinance sovereign bonds worth about $935 million that mature in March.