Phl completes P323.5-B bond swap

MANILA, Philippines - The government has successfully completed the second domestic bond exchange under the Aquino administration.

Investors offered to swap P323.5 billion worth of bonds for debt maturing in 2022 and 2031.

Total accepted tenders amounted to P292.5 billion, making it the largest domestic bond swap transaction to date exceeding the five previous offerings.   

Of the amount, the government issued P67.6 billion of 10-year benchmark bonds maturing in 2022 and P255.8 billion of 20-year bonds due 2031.

In a statement, the Department of Finance (DOF) said the bond swap extended the average maturity of the portfolio of eligible bonds by 37.9 percent or approximately 2.08 years with the extension of average maturity of accepted bonds from 5.48 years to 18.01 years.

“The transaction achieved cashflow and debt service relief of P152.6 billion in the medium term, which the government may channel to its infrastructure and socio-economic projects,” the government said.

The bond swap is part of the liability management program of the government to smoothen its debt maturity profile, extend the maturity of existing peso liabilities and establish liquid benchmarks at the long end of the yield curve.

With the swap, the government is able to reduce the bunching of debt maturities, giving it more room to use its funds for other necessary spending such as infrastructure and social services.

The government set coupon rates for the long 10-year and 20-year benchmark bonds at 6.375 percent and eight percent, respectively which were the minimum coupons previously announced.

These bonds, together with the 25-year bonds issued last December 2010, will serve as benchmarks for long term financing in line with government initiatives to promote public-private partnerships (PPP) in infrastructure projects and the development of capital markets, the Finance department also said in its statement.

Finance Secretary Cesar Purisima hailed the success of the transaction.

“The success of this bond exchange will further strengthen the fiscal position of the Republic as short and medium term debt will be swapped for longer dated securities. It also reaffirms the growing investor confidence in the country’s long term prospects,” he said.

The government tapped as joint deal coordinators for the bond exchange the state-run Development Bank of the Philippines and Land Bank of the Philippines. Four other private banks were part of the consortium that handled the transaction. These are First Metro Investment Corp., BPI Capital Corp., Citicorp Capital Philippines, Inc. and SB Capital Investment Corp.