PH starts foreign borrowing via global bond issuance

MANILA, Philippines–The government has started the issuance of long-tenor bonds, on top of a debt swap arrangement with global investors, in line with the programmed foreign borrowing for this year.

In a statement, the government said a global offering for cash of its global bonds due 2040 had started on Jan. 5. The bonds are denominated in US dollars.

No issuance amount was indicated in the statement, although the amount programmed for external commercial funding in 2015 was set at $750 million.

The Bangko Sentral ng Pilipinas, meanwhile, approved in December last year the issuance of up to $1 billion in Republic of the Philippines (ROP) bonds this year.

The pricing of the new bonds is expected at about 4 p.m. New York City time on Jan. 6 (or 5 a.m., Manila time, on Jan. 7), according to the statement.

The joint lead managers for the 15-year bond offering are: Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs (Asia) LLC, The Hong Kong and Shanghai Banking Corp. Ltd. (HSBC), J.P. Morgan Securities LLC, Morgan Stanley & Co. International plc, Standard Chartered Bank and UBS AG, Hong Kong Branch.

The settlement of the bond offering would be on Jan. 20, the government said.

The Philippines also invited holders of 15 previously issued ROP bonds maturing between next year and 2034 to submit offers to sell the bonds for cash in an aggregate purchase price amount determined by the government.

For the switch tender offer transaction, the maximum purchase amount should exclude accrued interest, which would be payable in cash on Jan. 12, according to the statement.

Deutsche Bank Securities and HSBC will be the dealer managers for this offer, while the latter will also serve as the billing and delivering bank.

The submission period for ROP bond holders interested to swap was set for Jan. 5 and 6. Settlement date is Jan. 12.

The total outstanding principal amount of ROP bonds maturing between January 2016 and October 2034 stood at $19.723 billion as of Jan. 5.

In a separate statement, debt watcher Standard & Poor’s Ratings Services (S&P) assigned a ‘BBB’ rating to the Philippines’ new dollar-denominated global senior unsecured bonds maturing in January 2040.

According to S&P’s website, a ‘BBB’ credit rating means there is an “adequate capacity to meet financial commitments, but more subject to adverse economic conditions.”

“The ratings on the Philippines reflect the country’s strong external liquidity and net external creditor position, combined with an effective monetary policy framework, which has sustained a low inflation and interest rate environment. These rating supports are weighed against a relatively low income level and fiscal constraints owing to a narrow revenue base and a shortage of basic infrastructure and government services,” S&P said.

National Treasurer Rosalia V. de Leon said last year that the share of foreign borrowings in the government’s financing program for 2015 would drop to 14 percent from 17 percent in 2014.

Originally posted: 3:40 PM | Tuesday, January 6th, 2015