Gov’t pulls off P120-B domestic debt swap

The government has successfully replaced over P120 billion in domestic obligations as it continues to improve the country’s debt profile.

Securities held by local investors were replaced with 10-year treasury bonds.

Accrued interest of these IOUs was also paid for using new debt, the Bureau of the Treasury announced on Monday.

About two weeks ago, the government launched a domestic debt swap initially targeting P60 billion in obligations.

Wick Veloso, president and CEO of HSBC Philippines, which helped handle the transaction for the government, said the bond exchange program would “improve the way the Philippines is managing its debt in the years to come.”

“The (National Treasury) provided a window for investors to exchange illiquid and inefficient bonds into a liquid and fairly priced new 10-year bond,” Veloso said.

On Tuesday, the Treasury said P121.72 billion in T-bonds maturing between September this year and June 2024, were replaced with P140.4 billion in 10-year notes. This was more than twice the P60 billion minimum the government wanted.

Total tenders reached P201.03 billion. About P2.02 trillion in bonds were eligible for replacement.

National Treasurer Rosalia de Leon earlier said the debt swap was done to replace illiquid bonds with new ones that are more tradable. More liquid securities are more desirable for investors to hold since these can be easily bought and sold whenever they want.

Prices of liquid securities are also more transparent since more investors are involved in trading.

“The transaction is part of the Republic’s ongoing commitment to proactively manage the government’s debt portfolio” de Leon said in a statement earlier this month.

“This will also provide an opportunity for existing government securities investors to exchange their illiquid bonds and receive benchmark bonds which will trade more efficiently in the market,” she said.

Apart from HSBC, the transaction was handled by Land Bank of the Philippines as co-global coordinators, while BDO Capital, BPI Capital, Development Bank of the Philippines, and First Metro Investments were joint deal managers.