Strong investor appetite underpinned a bond offer of Manila Water Co., which closed Friday, allowing the utility company to raise P4 billion as compared with its original offer size of P3 billion, a Manila Water official said.

The company increased the bond size to meet the market demand but subscriptions still exceeded P4 billion, Manila Water chief financial officer Sherisa Nuesa told the Philippine Daily Inquirer.

“This is the first bond offer after the onset of the global financial crisis,” Nuesa said.

The bonds carry a coupon or interest rate of 8.25 percent, compared with the benchmark Treasury bond rate of 7.75 percent in the market today.

“The local market continues to support our issue due to liquidity,” Nuesa said. “Although the whole market is quite selective, domestic banks are quite liquid and we think there is demand not only from institutional investors but also from retail investors, which is a very good sign.”

Nuesa said Manila Water also enjoyed strong support from multilateral funding institutions such as the World Bank, International Finance Corp., European Investment Bank and Germany’s DEG, which are all current lenders of the company.

The bond float proceeds plus undrawn loan facilities and internally generated cash will cover most of the company’s capital spending requirements in its concession area—the eastern zone of Metro Manila and some nearby areas—for the remainder of 2008 and up to 2009.

Manila Water is earmarking P37 billion over the next five years, or about P7-P8 billion annually, for capital expenditure.

Nuesa said that with a strong credit line Manila Water was not holding back on its plans for expansion abroad.

“We will just be selective in terms of risk assessment, meaning not only regulatory risks but also foreign exchange risks,” she said. “We are still looking at projects in China, India and other parts of Asia.”

The Manila Water bond issue has been assigned the highest issue rating of “PRS Aaa” by the credit rating firm Philippine Rating Services Corp., which defines PRS Aaa as rating “assigned to debt issues with the smallest degree of investment risk, whereby the interest payments are by and large protected by a large or exceptionally stable margin, and the principal is secured.” With editing by INQUIRER.net