Foreign investors snap up PH notes worth $1.5B

Philippine debt securities were warmly received by the international capital market, as the country completed a $1-billion debt exchange and the sale of $500 million in debt notes.

The Bureau of the Treasury on Friday announced that the international market absorbed a total of $1.5 billion worth of 10-year, dollar-denominated global bonds issued by the Philippine government.

National Treasurer Rosalia de Leon said that, of the amount, $1 billion was accounted for by bonds offered to existing bondholders for exchange.

By swapping freshly issued bonds with previously issued ones, the government would effectively be making lower debt payments because current interest rates have declined.

The balance of $500 million was the amount raised from the sale of global bonds.

Finance Secretary Cesar Purisima said the country’s investment grade factored in the successful exchange and sale of bonds in the international market.

The bonds were oversubscribed, with orders reaching more than $13.5 billion. Subscriptions came from the United States, Europe and Asia.

“We welcome this opportunity for the republic to revisit the international market, to herald its investment-grade status, and establish a reference for the country’s credit,” Finance Secretary Cesar Purisima said in a statement.

The Philippines’ global bonds—both the ones sold and the ones exchanged—fetched a coupon rate of 4.2 percent. De Leon said this rate was better than the earlier estimate of 4.5 percent.

“We were able to get a better deal than what we initially expected based on the market’s price guidance,” De Leon said in a phone interview.

The bond exchange and bond sale marked the first time that the Philippines tapped the international capital market after being given investment grades last year by all three international credit rating agencies.

Fitch Ratings gave the Philippines its first investment grade, raising the country’s credit score by a notch from junk status to the minimum investment grade of BBB-.

Standard & Poor’s and Moody’s Investors Service later likewise assigned a minimum investment grade to the Philippines in May and October, respectively.

The credit rating agencies cited the Philippine government’s declining debt burden, the country’s robust economic growth, its rising foreign exchange reserves, its stable banking system, and modest inflation as factors for their decision.

Meantime, some local economists believe the Philippine government did not get a good deal from its latest bond sale.

Victor Abola, economist from the University of Asia and the Pacific and consultant for First Metro Investments Corp., said the government could have saved money if it sold bonds in the domestic rather than the international market.

He said the 10-year government bonds could be sold currently in the domestic market at a rate of 3.2 percent.

“I don’t think it was a good deal considering that the government could have borrowed locally at a lower cost,” Abola told the Inquirer.

He also did not agree with views that there was a pressing need for the Philippine government to go back to the international market after being absent last year.

Last year, the Philippine government opted not to sell bonds abroad to help temper the increase in dollar inflows and to ease the peso’s appreciation.

But the Department of Finance said the government had to go back to the international market this year, adding that the long absence could hurt the country’s access to foreign commercial funding.