THE PHILIPPINES on Thursday initiated its issuance of dual-tranche US-dollar global bonds, along with a euro sustainability bond, representing its first entry into the global debt market in 2023.
In an announcement, the Bureau of the Treasury (BTr) revealed its 10-year and 25-year fixed-rate global bonds and seven-year euro sustainability bonds.
“This represents the Republic’s inaugural EUR (euro) sustainability bond and also signifies the Republic’s return to EUR bond markets since April 2021. The USD (US dollar) 25-year Global Bond and EUR 7-year bond will be issued under the Republic’s Sustainable Finance Framework,” the Treasury stated.
National Treasurer Sharon P. Almanza communicated in a Viber message that the government aims to offer benchmark-sized bonds.
Benchmark-sized offerings are generally valued at no less than $500 million.
The Treasury indicated that the proceeds from the 10-year dollar bonds will be allocated for general budget funding.
Proceeds from the 25-year dollar and seven-year euro sustainability bonds will be utilized to refinance assets in accordance with the Philippines’ Sustainable Finance Framework.
“The initial price guidance (IPG) for the USD 10-year and 25-year tranches was set at Treasuries +120 basis points (bps) area and 6.100% area respectively, while the IPG for the EUR 7-year tranche was stated at MS (mid-swap) +160 bps area,” the Treasury reported.
The transaction was expected to be priced during the New York session on Thursday.
“With a favorable market evolving over the week, we perceive a timely opportunity for the Republic to re-enter the capital markets. Our objective is to leverage the current market momentum to achieve the most efficient cost dynamics given possible uncertainties in the near future. We anticipate ongoing support from our esteemed investors,” Ms. Almanza commented in a statement.
Citigroup, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Standard Chartered and UBS are the joint lead managers and joint bookrunners.
HSBC, StanChart and UBS also serve as joint sustainability structuring banks.
A trader noted in a text message that interest in the global bond offering might reach as much as $2 billion.
“It seems this is primarily for refinancing a maturing dollar bond,” the trader remarked.
As per Bloomberg News, the Philippines has approximately $1.5 billion in dollar bonds maturing in March and €650 million in euro-denominated debt due in April.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort conveyed in a Viber message that the bond sale could entice investors seeking higher returns as US Treasury yields remain elevated.
“We anticipate strong interest from foreign investors who aim to take advantage of yield pickup,” the trader similarly noted.
“Consequently, bids/demand from international investors could be comparatively stronger, which may lead to reduced yields/borrowing costs for the National Government,” Mr. Ricafort added.
Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas, on the other hand, remarked in a Viber message that the government might secure “$3.5 billion and potentially up to $5 billion” from the global bonds.
“The timing appears favorable as the US 10-year yields are stabilizing,” he commented.
Fitch Ratings has assigned the Philippines’ proposed US dollar and euro bonds a “BBB” rating, consistent with its sovereign credit rating.
S&P Global Ratings similarly rated the bonds as “BBB+,” which aligns with the Philippines’ sovereign credit rating.
Finance Secretary Ralph G. Recto mentioned last week that the Philippines aims to raise $3.5 billion this year from the international debt market, primarily in dollars. — A.M.C. Sy with Bloomberg