The Marcos administration returns to the global debt market with a goal of raising up to $3 billion from an offering of US dollar-denominated bonds, proceeds from which will support the government budget, according to joint bookrunner BofA Securities.
Launched through the New York bond market, this latest sovereign offering involves at least $500 million each of 5.5-year, 10-year and 25-year tenor of debt securities.
Based on medium-term macroeconomic assumptions and fiscal program, government disbursements in 2023—the first full year of the Marcos administration—will reach P5.18 trillion or P1.47 trillion more than expected revenues of P3.7 trillion.
The budget deficit this year is expected to account for 6.1 percent of gross domestic product (GDP), smaller than the estimated 6.9 percent or P1.5 trillion share in 2022.
Proceeds from the 25-year issuance, which are “sustainability bonds,” are also intended to support the “sustainable finance framework.” Initial price guidance for this tenor is 5.95 percent per annum, based on a term sheet from BofA.
Under the Philippine Sustainable Finance Roadmap, the government intends to mobilize financing for climate action initiatives, facilitate investments in climate-resilient public infrastructure and develop projects that promote sustainable development.
The 5.5-year tenor is targeted to be priced at a spread of 155 basis points over benchmark securities and the 10.5-year tenor, at a spread of 195 basis points.
The administration made this move just three months after raising a total of $2 billion from the same venue in October 2022.
Timely foray
BofA Securities told the Inquirer this latest bond offering came a week after the US dollar primary markets had seen one of the highest volumes out of Asia, excluding Japan.
The Philippines “capitalized on a positive Asia market open and consecutive days of market stability to announce their [bond offers],” the company said.
For this latest exercise, BofA Securities is working with joint lead managers and joint bookrunners Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley, Standard Chartered Bank and UBS.
Further, this offering is rated investment grade by global credit watchdogs Moody’s Investor Service (Baa2), S&P Global (BBB+) and Fitch Ratings (BBB).
Fitch Ratings said the key driver for its rating was governance, in the context of environment, social and governance metrics, which are nonfinancial factors.
Moody’s Investor Service said its rating had taken into consideration high potential growth and a moderate government debt burden compared with peers. It noted a sufficiently strong external position to meet cross-border payment obligations and weather volatility.
“Even as it [the Philippines] emerges from the pandemic with a degree of economic scarring, Moody’s expects the recovery in real GDP growth to persist amid the deterioration in global credit conditions in the near-term, and converge toward potential rates of around 6 percent per annum beyond 2022,” the company said. INQ