Philippines sells 750 million in euro bonds
MANILA, Philippines — The Philippines returned to the euro debt market late Thursday Manila time, selling 750 million in eight-year global bonds at a coupon of 0.875 percent.
This issuance ended the country’s 13-year absence in the euro market, which was last tapped in 2006.
In a report to Finance Secretary Carlos G. Dominguez III, National Treasurer Rosalia V. de Leon said the IOUs to be settled on May 17 generated tenders of nearly three billion euros, six times oversubscribed from the original plan to issue 500-million euros worth of debt paper.
As such, the government jacked up the offering to 750 million euros, De Leon said.
“There was good reception from high-quality and real money investors especially from Europe despite lower than expected GDP [gross domestic product] figures and ongoing tensions between US and China,” according to De Leon.
Last Thursday, the government reported that GDP grew 5.6 percent during the first quarter of this year, the slowest pace of economic expansion in four years, mainly as the government operated under a reenacted budget and underspent on public goods and services at the start of the year due to an impasse in Congress on the 2019 appropriations.
In a statement Friday, the Bureau of the Treasury said “the overwhelming reception from the market allowed the pricing for the newly issued global bonds to tighten at EUR Midswaps+70 basis points after being revised twice from an initial pricing guidance of EUR Midswaps+90-100 bps area.”
“By geographical allocation, 24 percent of the bonds were allocated to Germany, 15 percent to Italy, 10 percent to the UK, 26 percent to the rest of Europe, 9 percent to the US, 6 percent to the Philippines, 5 percent to the rest of Asia, and the remaining 5 percent to other countries. In terms of investor type, 59 percent went to fund managers, 24 percent went to banks and corporates, 11 percent went to insurance, pension funds, and official institutions, and the remaining 6 percent went to other types of investors,” the Treasury added.
”It is also noteworthy that the spread over benchmark when we last issued in the euro market was 294 bps,” De Leon told Dominguez.
In response, Dominguez said: “This successful transaction is a testament to the international investor community’s vote of confidence in the country’s strong macroeconomic fundamentals and sustained high growth prospects despite global financial headwinds.”
“Following its successful float of bonds in China and Japan, the government has now issued global bonds in Europe as part of its efforts to diversify funding sources for its aggressive investments in infrastructure and human capital development,” the Finance chief added.
The money to be raised from this euro bond sale will finance the national budget.
“The successful transaction allowed us to diversify our funding program to support productive spending for infrastructure and social services,” De Leon said.
The borrowing mix for 2019 is 76-percent domestic, 24-percent external.
For this transaction, Deutsche Bank and UBS were the joint global coordinators. The joint book runners were BNP Paribas, Credit Suisse, and Standard Chartered Bank.
