MANILA, Philippines – The Power Sector Assets and Liabilities Management Corp. (PSALM), the agency tasked to sell the government’s power assets, successfully raised $1 billion worth of 10-year global bonds yesterday on the back of strong investor appetite, Finance Secretary Margarito Teves announced.
Teves said the successful fund-raising activity shows that despite the global financial turmoil, Philippine bonds remain attractive to investors.
“We are pleased with the outcome of the transaction. It clearly highlights investors’ appreciation of the Republic of the Philippines’ credit and their confidence in the overall economic prospects of the country,” he said.
National Treasurer Roberto Tan earlier said that proceeds of the bond sale would be used for the financing needs of the National Power Corp. (Napocor).
The government had tapped Deutsche Bank, HSBC and Morgan Stanley as joint lead managers and joint bookrunners for the transaction.
The 10-year global bond issuance, which matures in 2019, is guaranteed by the National Government.
PSALM said yesterday that the issue is rated B1 and BB- by Moody’s Investors Service and Standard & Poors, on par with the sovereign credit ratings of the Republic. The notes were priced at a yield of 7.375 percent and were issued at a price of 99.127, with a semi-annual coupon of 7.25 percent.
A total of 208 investors participated in the transaction, with 55 percent of the bonds allocated to Asia, 17.5 percent to Europe, and 27.5 percent to the United States.
PSALM president and chief executive officer (CEO) Jose Ibazeta said that investors’ strong appetite showed their confidence in PSALM. “The strong response to our debut offering signifies the confidence of investors globally in PSALM and on our ability,” he said.
The Electric Power Industry Reform Act (EPIRA) of 2001, the law that put in place reforms in the power industry, authorized PSALM to act as the government’s financial manager whose primary responsibilities are to optimize the liquidation of Napocor’s debts and stranded contract costs, and rebalance the power company’s foreign obligations through swaps or peso refinancing. The debts include lease payments to independent power producers, and the outstanding obligations of electric cooperatives to the National Electrification Administration and other government agencies.
As financial manager, PSALM’s functions include managing other liabilities it has assumed in the government’s behalf as well as its future borrowings. This is to ensure that PSALM will be able to settle all principal and interest payments as they fall due. Refinancing or derivatives structures, whenever necessary, will be obtained at minimum cost.
PSALM’s liability management function also requires mitigating foreign exchange risks through hedging or other means since some of the debts are denominated in foreign currency.