Philippines launches $2 B global bond issue

MANILA, Philippines – The Philippines launched yesterday a debt buyback and global bond issue targeted to ease the government’s debt burden.

While the transaction’s total amount is yet to be released, the government said it would offer new 25-year global peso bonds due 2041.

Part of the proceeds will be used to redeem qualified maturing debts between now and 2037.

“The invitation is part of the Republic’s general debt management program and its broader program to manage its external liabilities,” the government said in a statement.

Paying debts ahead of schedule frees up the national budget tied up to payments. Issuing longer-dated obligations, meanwhile, also delays future settlements.

On Tuesday, National Treasurer Roberto Tan told reporters both the buyback and fresh issuance could be worth up to $2 billion, “depending on market conditions.” He did not respond to queries yesterday.

Sought for comment, a bond trader at a local bank said the results of this offering could mimic last year’s global bond float.

The Aquino administration raised $2 billion from 25-year global bonds issued last year. This coincided with a debt buyback where $1.5 billion were awarded.

“We believe the issuance has long been telegraphed by the market and thus, would be widely received by investors,” the trader said in a phone interview.

“The coupon rate for new cash could be around the same range as last year’s 3.95 percent,” he added.

Nicholas Antonio Mapa, research officer at the Bank of the Philippine Islands, agreed.

“The National Government gave an indication of four percent but we do expect rates to fall given that this would like very similar to the previous bond offering,” Mapa said in an e-mail.

Under Aquino, the Philippines has been an active foreign borrower early in the year to finance government financing requirements.