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PH sells $500M in new bonds to fund Duterte infrastructure projects

By: - Reporter / @bendeveraINQ
/ 10:10 PM January 19, 2017
WITH RAPID urbanization and in the name of progress, Metro Manila as well as other cities in the Philippines kept on building and building to the point that the ability of authorities to build essential green infrastructure is exceeded.

Metro Manila is the economic and political capital of the Philippines but with President Duterte’s 10-point socioeconomic agenda, he intends to spend billions of pesos in infrastructure development throughout the country and to send the benefits  of economic growth nationwide. (INQUIRER FILE PHOTO)

MANILA — The Philippine government sold $500 million in new global bonds while also successfully switching $1.5 billion in previously issued bonds to fund the higher infrastructure spending requirement of the Duterte administration.

The $500 million in 25-year bonds maturing in 2042 were sold at a coupon of 3.7 percent, similar to the record-low rate in 2016. The coupon was below the initial pricing guidance of 3.95 percent, the Bureau of the Treasury said in a statement on Thursday.

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“This represents the tightest priced long-dated global bond offering ever issued by the Republic on a spread basis while the yield of 3.7 percent achieved by the Republic on this transaction was on par with the Republic’s 25-year bond offering in 2016—a remarkable feat considering the higher US interest rate environment currently versus last year,” the Treasury said.

“Importantly, this marks the first international capital markets transaction for the new Duterte administration, continuing a strong track record of prudent liability management transactions,” it added.

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The global bond sale attracted a total of $4.5 billion in tenders, of which 43 percent came from Europe, 33 percent from Asia, and 24 percent from the United States.

“With this transaction, the Republic has extended its excellent track record in executing liability management transactions. The tight pricing we achieved on the new 25-year bond offering, we believe, underscores the confidence of global investors in the Duterte administration,” Finance Secretary Carlos G. Dominguez III said.

The new money raised from the offshore bond issuance will be used for budgetary support, according to the Treasury.

The government also switched $1.5 billion for bonds maturing between 2019 and 2037, with bids reaching $3.56 billion.

“Amidst the volatility in global markets, we have managed to garner robust support from the fixed income investor community, a testament to the resilience of the Philippine economy as well as the strong faith that these investors have in the Duterte administration in executing and implementing reforms and strategies. Once again, the liability management exercise has allowed the Republic to achieve significant cost savings that can be channelled towards productive areas that will benefit the country,” National Treasurer Roberto B. Tan said.

The Treasury said Citigroup, Credit Suisse, Deutsche Bank, Standard Chartered Bank and UBS acted as joint global coordinators, dealer managers as well as bookrunners for the global bond sale.

Infrastructure build up forms part of the Duterte administration’s 10-point socioeconomic agenda aimed at slashing the poverty incidence to 14 percent by 2022 from 21.6 percent last year.

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This year, the Duterte administration plans to spend P860.7 billion or 5.4 percent of the gross domestic product (GDP) on hard infrastructure, en route to bringing the infrastructure spending-to-GDP ratio to 7.2 percent by 2022.  SFM

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TAGS: bookrunners, Bureau of Treasury, Business, Carlos G. Dominguez III, Citigroup, Credit Suisse, dealer managers, Department of Finance, Deutsche Bank, Duterte Administration, economic growth, economy, Finance, global bond sale, global bonds, government budget, government funds, Gross Domestic Product, Infrastructure, infrastructure development, infrastructure projects, joint global coordinators, national budget, Philippine government, Philippine president, Roberto B. Tan, Rodrigo Duterte, Standard Chartered Bank, UBS
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