RP completes $1.5-B 10-year bond issue

The National Government successfully sold $1.5 billion worth of 10-year bonds in the international debt market yesterday, completing the country’s external funding requirement for 2009 and making the Philippines the first sovereign debt issuer in Asia this year.

“The transaction fulfills the government’s expected external funding requirements for 2009 and represents an important success for the Philippines. The strong interest we received from domestic and global investors was key to the completion of the deal. We are hopeful that our success will bode well for other Philippine and Asian borrowers,” Finance Secretary Margarito Teves said.

The Department of Finance (DOF) said in a statement that the long-term bonds maturing on June 17, 2019, were priced at 99.158 percent to yield 8.5 percent.

Total tenders reached P6 billion or four times the government’s programmed borrowing for the year, market sources said. Sources attributed the strong investor appetite for the bonds to the fact that the Philippines is the first debt issuer in the region this year as other governments have yet to float their own debt instruments.

The issue marks the first global bond offering for the country since the $500 million re-opening of the 2032 global bonds in January 2008.

National Treasurer Roberto Tan said that by geographical distribution, 41 percent of the bonds were sold in Asia, 22 percent in Europe and 37 percent in the United States.

As with previous years, the government undertook a quick-to-market approach with the bookbuilding process completed within a single day.

Credit Suisse, Deutsche Bank and HSBC acted as joint lead managers and joint bookrunners for the transaction.

Traders said there was a strong demand for Philippine bonds because of progress in its revenue efforts such as the value-added tax (VAT) reform implemented in 2006.

The market had expected the government to launch both 10-year and 25-year bonds but Tan said there was strong demand for 10-year debt papers.

Proceeds of the bond sale would be used to fund the government’s budgetary requirements.

According to the DOF, the government plans to borrow more in 2009 to fund a bigger budget deficit.

Officials said the budget deficit is likely to swell to as much as P102 billion in 2009, or P62 billion more than the original program of P40 billion.

For his part, Economic Planning Secretary Ralph Recto said the 2009 budget includes a P300 billion stimulus package designed to keep the engines of economic growth turning in the critical first few months of 2009.

“What we intend to do is upgrade infrastructure and capital stock and expand social protection at the same time,” Recto said.

He added the stimulus package would seek to “save and create jobs, protect the poorest of the poor, returning overseas Filipino workers in export industries, ensure low and stable prices to support consumer spending and enhance competitiveness in preparation for the global rebound.”