PH bond issue nets $3B from offers worth $25B
US dollar banknotes are seen in this illustration taken July 17, 2022. (File photo by DADO RUVIC / Reuters)
MANILA, Philippines — The Marcos administration returned to the global bond market just three months after its debut in October 2022 with a “blockbuster” three-tenor issuance, raising $3 billion — substantially more than the target amount.
The Philippines is borrowing $500 million through 5.5-year bonds at a cost of 4.743 percent; $1.25 billion through 10-year bonds at 5.001 percent; and $1.25 billion through 25-year bonds at 5.5 percent.
The prices represented spreads over benchmark US securities of 105 basis points or 1.05 percentage point for the 5.5-year tranche and 145 bps or 1.45 ppt for the 10-year tranche.
Joint bookrunner BofA Securities said in a statement the Philippines “has yet again successfully navigated the markets to capture conducive market conditions and achieve both its pricing and sizing expectations, pricing all tranches with negative new issue concessions.”
Lower borrowing costs
The global banking division of Bank of America meant that the final prices were lower by 50 basis points or 0.5 percentage point for the 5.5-year bond and 10-year bond, and 45 bps or 0.45 ppt for the 25-year bond.
When the offers were announced on Jan. 9, the 5.5-year bonds were targeted to be priced at a spread of 155 bps over benchmark securities and the 10.5-year bonds at a spread of 195 bps. The 25-year bonds were initially tagged at 5.95 percent.
BofA Securities said that with strong participation from mutual funds, pension funds, insurance and reinsurance companies and endowment funds, orders exceeded $7.1 billion for the 5.5-year tranche, $6.7 billion for the 10-year tranche and $8.2 billion for the 25-year tranche.
This means that — with the minimum issue size of $500 million per tranche — the 5.5-years were 14.2 times oversubscribed. Similarly, orders for the 10-years were 5.4 times more than the minimum and for the 25-years 6.6 times.
Strong demand
With lenders making available a total of more than $25 billion for the three tranches, there was $22 billion that could not be accommodated.
“The blockbuster reception and tight pricing achieved in all tranches of our latest offering, despite coming on the heels of curtain-raisers done by other big-name sovereigns, reaffirms the distinction of Philippine credit as favored proposition even in times of uncertainties in the market landscape,” National Treasurer Rosalia de Leon said in a statement.
“It is both a reward for our masterful navigation of the pandemic crisis and a motivation to become a beacon for growth in a period of dimming global prospects,” De Leon said.
Finance Secretary Benjamin Diokno said the strong interest across all tranches from a diverse pool of high-quality investors showed that international investors recognize the Philippines’ strong economic recovery, sound fiscal policies, and sensible socioeconomic agenda to promote sustainable and inclusive economic growth.
“The outcome represents an overwhelming investors’ vote of confidence on the economic managers’ astute economic stewardship,” Diokno said.
BofA Securities noted that this latest issue repeats the Philippines’ largest-ever US bond deal —a two-tranche, $3-billion issuance in July 2021.
