PH borrows again through 55-B yen samurai bonds

MANILA, Philippines—The Philippines on Tuesday (March 30) returned to Japan’s debt market after a one-year absence to borrow at least 55 billion yen (over P24 billion) through three-year samurai bonds, which fetched a zero coupon, or without interest but with deep discounts when redeemed.

National Treasurer Rosalia de Leon said the Philippines was the first-ever sovereign, non-resident samurai issuer whose transaction had a zero coupon (0.001 percent), even as it was usual among domestic issues in Japan.

This was the Philippines’ first offshore bond sale in 2021. Settlement will be on April 13 for the bonds maturing on April 12, 2024.

“The new three-year samurai tranche was priced at 21 basis points (bps) above the benchmark, the tightest spread the republic has achieved so far since its return to the market back in 2018,” the Bureau of the Treasury said in a statement. This meant the borrowing cost for the Philippines was low.

The Philippines did not tap the samurai market in 2020 as the Treasury instead ramped up domestic borrowings.

Of the borrowing program worth P3.03 trillion for 2021, external borrowings — which included offshore bond issuances and foreign loans from multilateral lenders as well as bilateral development partners — will contribute a gross amount of P442.4 billion.

De Leon earlier said that besides the yen-denominated samurai, the Philippines was also considering to issue renminbi-denominated panda, euro-denominated global bonds as well as US dollar-denominated IOUs for external financing. In 2020, it sold euro bonds and ventured into the US-dollar global bond market twice.

Finance Secretary Carlos Dominguez III said this was a good time for offshore commercial borrowings “while rates are still relatively low.”

The Treasury said it initially wanted to sell only about 30 billion yen but the transaction was upsized “following strong investor demand allowing the deal to expand new investor base for Philippine issuances.”

The Philippines’ best credit rating was “A-” which Japan’s top debt watcher, Japan Credit Rating Agency Ltd. (JCR), upgraded in 2020 from “BBB+” previously.

“This landmark transaction highlights the government’s capability to respond to challenging times with creative solutions to free up fiscal space to augment the national government’s COVID-19 response,” De Leon said.

“The Philippines’ successful return to the Japanese bond market at this precarious time underlines the continued investor confidence in our economy, brought about by its strong fiscal position and prudent management that augurs well for a robust and sustainable recovery from the economic turmoil brought by the COVID-19 pandemic,” the Treasury quoted Dominguez as saying.

“This bond offering brings to light the government’s relentless drive to generate sufficient resources to fund its COVID-19 response and other priority programs that are meant to return the country soon enough to the path of high and inclusive growth,” Dominguez said.

“The issuance shows the republic’s preparedness to expand its funding sources and the continued confidence and support of its credit investor base,” Finance Undersecretary Mark Dennis Joven said.

Last month, Joven said the Department of Finance (DOF) planned to raise $23.71 billion (about P1.15 trillion) in foreign financing from grants, loans as well as offshore bond issuances in 2021, partly to finance mass COVID-19 vaccination.

The Treasury said SMBC Nikko Securities Inc. was the lead manager as well as book runner for this samurai issuance.

TSB