More Philippine firms seen tapping international bond market

MANILA, Philippines - More Philippine companies are expected to tap the international bond markets on strong investor demand and improved sovereign ratings, Moody’s Investors Service said.

“We expect greater cross-border corporate issuance out of the Philippines over the coming years,” Rahul Ghosh, vice president and senior research analyst at Moody’s, said in a report titled Inside Asean.

“Global investors are likely to exhibit strong appetite for Philippine paper on the back of the country’s strengthening macro fundamentals and a desire to diversify portfolios, which will support market conditions for prospective issuers,” Ghosh said.

Increasing offshore merger and acquisition involving Philippine firms will be the basis for foreign currency financing needs, Ghosh said. However, he does not see a “sudden surge” in new offshore issuances as domestic liquidity conditions remain adequate.

“The Philippines’ macroeconomic credentials are strong. Robust economic growth prospects, improving fiscal and government debt ratios, and a healthy external position have underpinned a material re-rating of the Philippines’ sovereign credit profile in recent years,” Ghosh said.

Moody’s upgraded the country’s credit rating to a notch above the minimum investment grade in December last year amid the decline in the Philippine’s debt burden, institutional reforms, and favorable prospects of the economy.

The Philippines enjoys a Baa2 rating with a stable outlook from the debt watcher.

“Investor appetite for Philippines’ debt is strong. With the Philippines also a net beneficiary of lower global commodity prices, investors appear keen to gain exposure to the country,” Ghosh said.

The government, for one, in January raised $2 billion from the issuance of a 25-year bond with a coupon rate of 3.95 percent.

“Given the improving sovereign rating trends and clear investor demand for the country’s paper, we believe that an increasing number of Philippine corporate issuance could look to the international markets to take advantage of favorable sentiment,” Ghosh said.

He noted domestic markets will continue to be the firms’ main financing channel amid the adequate liquidity conditions.

“Philippine corporates rely on banking lending and domestic bond issuance to meet their financing needs, and these channels are likely to remain accommodative in 2015,” Ghosh said.