RP global bond issue 6 times oversubscribed

MANILA, Philippines - The Philippines successfully sold $750 million in global bonds to foreign investors on Monday to raise funds for its swelling budget deficit.

The 6.5 percent dollar-denominated securities, priced at 99.065 percent, are due on 2020 and would yield 6.625 percent or an equivalent of 332.6 basis points over benchmark US Treasuries.

The deal, which was nearly six times oversubscribed, marks the second international transaction for the government this year after the $1.5-billion global bond issuance in January.

The January issuance was expected to be government’s only foray in the international debt market for the year but the need to finance a wider-than-programmed budget deficit forced a second bond issue.

National Treasurer Roberto Tan, pleased with the results of the transaction, said risk aversion in emerging markets has subsided, adding that long-term Philippine papers have always been attractive.

“We are very pleased with the results of the transaction. It represents the lowest yield we have ever achieved in a 10-year benchmark US dollar global offering,” Tan said yesterday.

By geographical allocation, 60 percent of the buyers came from Asia, 25 percent from the US and 15 percent from Europe.

Finance Secretary Margarito Teves, for his part, said in a statement that the strong response to this issuance reflects continued investor confidence in the policies and economic management of the government particularly in responding to the global economic crisis.

“The sovereign credit ratings on the Philippines derive support from the apparent resilience of the sovereign’s external accounts, whereby an improving liquidity position continues to lower external liquidity risk despite the extremely challenging external environment,“ S&P said in a statement.

The rating is also supported by the low level and low likelihood of realization of contingent liabilities posed by the banking system, given the absence of features that caused bank collapses and necessitated government bailouts in numerous other countries. System-wide asset quality and capitalization are not expected to deteriorate materially from 2008 levels of 4.2 percent nonperforming loans and a capital adequacy ratio of 14.6 percent, S&P added.

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

Tan said this would be the last global bond offering for the year and that the rest of the financing needs may be covered locally or through the issuance of yen-denominated bonds.

“The issuance of Samurai bonds is still an option,” he said.

Samurai bonds are yen-denominated bonds issued in the Japanese financial market by a foreign government or company.

The Philippines and the Japan Bank for International Cooperation have signed a memorandum of understanding for the proposed Samurai bonds.

Under the MOU, JBIC would guarantee 95 percent of the present value of all principal and interest payments.

The last time the Philippines tapped the Japanese capital market was in 2001 with the issuance of Shibosai bonds, also a form of Samurai bonds, amounting to ¥50 billion.