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PH sells $500M in bonds

First foreign borrowing under Duterte; funds earmarked for infra spending
By: - Reporter / @bendeveraINQ
/ 12:30 AM January 20, 2017

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 last year. The coupon was below the initial pricing guidance of 3.95 percent, the Bureau of the Treasury said in a statement 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 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.

“Amid 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 channeled toward productive areas that will benefit the country,” National Treasurer Roberto B. Tan said.

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

Infrastructure buildup 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.

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