Phl launches sale of $750-M 10-yr peso notes

MANILA, Philippines - The Philippines, Asia’s largest sovereign issuer, launched yesterday the sale of the equivalent of at least $750 million in 10-year global peso notes (GPN) and is expected to have priced the transaction last night.

“We already launched it and we expect the pricing tonight,” Finance Undersecretary Rosalia de Leon said.

Proceeds would be used to buy back existing debt that would allow the government to lengthen its maturity profile and take advantage of the present low interest rate environment, De Leon said.

Traders said that as a result of the exercise, there would be a liquid long-term benchmark.

The Philippines has tapped Credit Suisse, Deutsche Bank and HSBC as global coordinators for transaction, which could go as high as $1.5 billion.

This is the government’s first GPN issue for the year. In January, it successfully raised $1.5 billion from an issue of 2037 global bonds.

The Philippines first issued global peso bonds in September 2010, the first in Asia to sell bonds abroad in its own currency.

It sold $1 billion in 10-year global peso bonds in September 2010 and $1.25 billion in January 2011.

The issuance of peso-denominated bonds is among the new initiatives undertaken by the new administration to better manage government debt.

The government had programmed to borrow $4.02 billion from external sources this year, lower than the programmed $4.5 billion for last year, according to the 2012 borrowing program.

Of the $4.02 billion, the government plans to borrow $2.25 billion from the commercial debt market and to borrow $1.77 billion worth of program and project loans.

The government borrows from the local and foreign debt markets to fund its budget requirements.

It expects this year’s budget deficit to reach roughly P279 billion or 2.6 percent of the economy’s output, from the P197.8 billion incurred last year or two percent of gross domestic product (GDP).

The government had wanted to launch the sale as early as September but had to wait for better market opportunities.

The launch yesterday comes on the heels of a much-touted credit rating upgrade last month by Moody’s Investors Service.