Philippines gears up for maiden issuance of panda bonds

MANILA, Philippines — The Philippine government may issue as early as next week panda bonds worth 1.46 billion renminbi in the Chinese onshore market, the Department of Finance (DOF) said.

During the 28th Inter-Pacific Bar Association Annual Meeting and Conference in Taguig City, Finance Secretary Carlos Dominguez III said the government is already gearing up for its maiden issuance of three-year panda bonds or renminbi-denominated debt papers.

“We have a team there (in China) now. Our National Treasurer, in fact, is in China doing a roadshow. So that will happen in the next week or so. We hope that it is successful,” Dominguez said during the open forum session.

However, the finance chief, during an interview with reporters, clarified the volume and timing of the issuance would still depend on market conditions.

“What we’re watching now is the spread and the interest rate. If the market condition is not good, they (Bureau of the Treasury) may postpone it as they want to make sure that they get the right rates,” he said.

He said, portion of the proceeds of the panda bond float will be used as budgetary support, while the rest may be swapped with the Bangko Sentral ng Pilipinas for its renminbi requirements.

This would be the first time the Philippine government issues renminbi-denominated bonds in the Chinese onshore market.

Last February, the People’s Bank of China gave its approval for the Philippines’ planned issuance of about 1.46 billion renminbi ($200 million) worth of debt papers in the Chinese onshore market.

The Bureau of the Treasury (BTr) said it is also tapping the Bank of China as the lead underwriter of the panda bond float.

China Lianhe Credit Rating Co. Ltd., has assigned its highest rating or ‘AAA’ for the issuance as it has the “lowest expectation of default risk.”

According to National Treasurer Rosalia de Leon, floating renminbi securities in the Chinese onshore market would serve to diversify the funding sources of the Philippine government.

She said government is currently discussing with its underwriters the pricing guidance for the issuance to determine if rates are currently within a “competitive level.”

The government borrows from both local and foreign lenders to pay maturing debt and to plug its budget deficit.

Foreign financing for 2018 is programmed at $3.456 billion or P176.26 billion, corresponding to 20 percent of the P889.51 billion debt ceiling set next year. Domestic credit will take up the remaining 80 percent, with P711.8 billion.