THE PHILIPPINES on Thursday launched its two-tranche global bond offering in US dollars, as well as a euro-denominated sustainability bond.this year its first foray into the international debt market.
In a statement, the Bureau of the Treasury (BTr) announced its 10-year and 25-year anniversary.year fixed rate global bonds and seven-years euros sustainabley bonds.
“This marks the Republic’s first ever EUR (euro) sustainability bond and also marks the Republic’s return to the EUR bond markets since April 2021. The USD (US dollar) 25-year Global Bond and EUR 7-year will be issued under the Republic’s Sustainable Finance Framework,” the Ministry of Finance said in a statement.
National Treasurer Sharon P. Almanza said in a Viber message that the government is focused on offering benchmark-sized bonds.
Benchmark-sized issues are typically worth at least $500 million.
The Treasury Department said proceeds from the sale of the 10-year dollar bonds will be used for this purpose general budget financing.
Proceeds from the 25-year dollar and seven-year euro sustainability bonds will be used to refinance assets in accordance with the Philippine Sustainable Finance Framework.
“The initial price guidance (IPG) of 10-year and 25-year tranches of USD were announced in the treasury bond range +120 basis points (bps) and 6.100% respectively, while the IPG of the 7-year tranche of EUR was announced on MS (mid-swap) +160 bp area,” the Treasury said.
Pricing of the transaction was expected to take place during the New York session on Thursday.
“With a constructive market developing over the past week, we see an opportune time for the Republic to re-enter the capital markets. Our goal is to take advantage of the current market momentum to earn the most returnsFcient cost dynamics in anticipation of possible uncertainties in the near future. We look forward to the continued support of our valued investors,” Ms. Almanza said in a statement.
Citigroup, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Standard Chartered and UBS the joint lead managers and joint bookrunners.
HSBC, StanChart and UBS are also joint banks structuring sustainability.
A trader said in a text message that demand for the global bond supply could reach $2 billion.
“I think this is just for refinancing a maturing dollar bond,” the trader added.
According to Bloomberg News, the Philippines has about $1.5 billion in dollar bonds maturing in March and $650 million in euro debt due in April.
Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said in a Viber message that bond sales could be attractive to investors seeking higher returns as U.S. Treasury yields are high.
“We expect strong demand from foreign investors looking to benefit from rising interest rates,” the trader also said.
“So the bids/demand from international investors could be relatively higher, and therefore still lead to lower revenues/borrowing costs for the national government,” Mr Ricafort added.
Reyes Tacandong & Co. Senior Advisor Jonathan L. Ravelas, on the other hand, said in a Viber message that the government could pull “$3.5 billion and even up to $5 billion” from global bonds.
“The timing could be good as US 10-year yields take a breather,” he added.
Fitch Ratings has assigned the Philippines’ proposed US dollar and Euro bonds a ‘BBB’ rating, the same as the sovereign credit rating.
S&P Global Ratings also rated the bonds a ‘BBB+’, which was in line with the Philippines’ sovereign credit rating.
Treasury Secretary Ralph G. Recto said last week that the Philippines aims to raise $3.5 billion in the international debt market this year, most of which will be in dollars. — AMC Sy of Bloomberg