Gov’t completes 1st debt-swap in 3 yrs with sale of P140-B bonds

MANILA, Philippines - The Philippines sold about P140 billion  worth of new 10-year bonds and completed its first  bond exchange in three years  as part of a liability management exercise aimed at stretching the average maturity of outstanding debt and reducing interest expenses.

The new 2024 bonds carry a coupon of 4.125 percent.

A total P240.5 billion worth of existing eligible bonds were offered under the debt liability exchange but the government accepted only P122 billion from existing holders and P9.4 billion in bids from new investors.

The government was originally looking to raise as much as P60 billion from the program.

With the transaction, the average coupon of bonds accepted in the debt exchange saw the average maturity lengthened by 5.2 years.

“This domestic liability management exercise gave our investors the avenue to exchange illiquid bonds with new benchmark bonds which will trade more efficiently in the debt markets,” Finance Secretary Cesar Purisima said in a statement.

The Philippines last conducted a peso-denominated bond exchange in July 2011 when it issued a total P323.4 billion of debt due in 10.5 and 20 years. In January, it agreed to pay $1.08 billion to buy back foreign currency notes as part of its $1.5 billion global bonds.

HSBC and Land Bank of the Philippines acted as joint global coordinators and joint dealer managers for the bond sale together with BDO Capital & Investment Corporation, BPI Capital Corp., Development Bank of the Philippines and First Metro Investment Corp.

The bond swap was in line with the government’s strategy of paring down its budget deficit and extending bond maturities.

“We congratulate the Republic for achieving yet another highly successful bond exchange program, one which helps improve the way the Philippines is managing its debt in the years to come. The Bureau of the Treasury listened well to institutional partners and investors. The BTr provided a window for investors to exchange illiquid and inefficient bonds into a liquid and fairly priced new 10 year bond,” said HSBC president and CEO Wick Veloso. – With Ted Torres