RP to sell $1-B global bonds

The Philippines will sell as much as $1 billion in 25-year global bonds to help finance its budget deficit.

Market sources said investors had placed buying orders well in excess of $3 billion for the bonds, which initial guidance suggests will be priced to yield 6.6 percent, plus or minus five basis points.

The bonds, which the government has previously said will be used to help bridge a budget deficit, will be priced in New York later today (New York time).

Finance Secretary Margarito B. Teves told reporters that the bond float had earlier been approved in principle by the Bangko Sentral ng Pilipinas (BSP).

"We really cannot reveal much more than that because we have to comply with SEC rules that require us to keep everything quiet while the transaction is ongoing," Teves said.

The Philippines is Asia’s second-largest sovereign debt issuer after Japan. The latest bond issue would be due in January 2032. "Appetite for Philippine debt has been very strong especially if this is the only financing for the year," said Desmond Soon of Pacific Asset Management Co. in Singapore.

Officials said the National Government (NG) has mandated Citigroup, Credit Suisse and Deutsche Bank as lead underwriters for the issue.

The country plans to borrow $2.466 billion abroad this year, of which $1.466 billion will be in official development assistance loans and $1 billion in commercial borrowings.

Analysts said they believed the Philippines had decided to raise the $1 billion through one bond, rather than through separate deals with different maturities, to offer a more liquid issue which would be more appealing to investors.

The Bureau of Treasury (BTr) earlier said that the NG plans to borrow $2.466 billion from foreign creditors this year.

Once completed, the $1-billion bond issue would fill up the NG’s commercial borrowing requirement for 2007.

Lower rates

Yields on peso bonds fell to a record low last month after the BTr said it would cut local borrowings by about 15 percent to P208 billion. Higher revenue and spending curbs narrowed the country’s deficit in the first 11 months of 2006 to P58.3 billion, or less than half of the amount in the same period a year earlier.

"The market is very expensive now, and the ROP issue is even more so," said Low Guan Yi, who helps manage $1.1 billion of global emerging debt at Pictet & Cie in Singapore. "The bonds look expensive compared to the CDS."

The cost of credit-default swaps based on $10 million of Philippine debt rose one percent to $123,500 from $122,000 yesterday in Asia, according to prices from BNP Paribas. The contracts, a gauge of the country’s ability to repay its dollar bonds, rise as perceptions of the government’s credit quality deteriorate.

The Philippines will borrow $1.5 billion from the World Bank, Asian Development Bank and other development assistance lenders this year, Cruz said. That may bring total foreign borrowing for 2007 to almost $2.5 billion.