PSALM completes sale of P30 billion worth of retail bonds

MANILA, Philippines - The Power Sector Assets and Liabilities Management Corp. (PSALM) has successfully completed the sale of P30 billion worth of five- and seven-year fixed-rate retail bonds.

PSALM attributed the success of the bond offering to the series of roadshows held in Manila, Cebu and Davao prior to the auction.

The peso bond issue, the largest peso-denominated debt issue so far this year, were priced at yields of 6.875 percent for the five-year tenor, and 7.750 percent for the seven-year tranche, or 36 basis points and 43 bps above the five- and seven-year benchmarks, respectively.

Basis points refer to the yield on bonds, with each percentage point of yield in a bond equaling to 100 basis points. For example, if a bond yield changes from 7.25 percent to 7.39 percent, that is a rise of 14 basis points.

The auction marked the first time PSALM has tapped the domestic capital markets, as strong demand from domestic investors made the issue 1.7 times oversubscribed.

The bonds were offered to government securities eligible dealers through a Dutch auction, also known as descending price auction, which uses a bidding process to find an optimal market price for the bond the highest price at which an issuing company can sell all the available shares.

Total tenders during the auction reached P33.71 billion, with demand reaching P19.08 billion for the five-year paper and P14.64 billion for the seven-year paper.

The P20 billion awarded by PSALM during the auction was divided equally between the two tranches at P10 billion per tenor.

PSALM said the remaining P10 billion was sold through a public offering.

The total amount for the five-year peso bonds are P11.32 billion, while the seven-year peso bonds are P18.68 billion.

Energy Secretary Jose C. Ibazeta said the timing of the issuance was perfect, “as PSALM took advantage of the deep liquidity in the domestic financial system.”

“The success of this landmark transaction is a clear indication of the public’s confidence in both PSALM and the power sector in general,” he said.

The offer period of the bonds to the general public formally began after the auction and will continue until April 19.

During this time, retail investors may subscribe to the bonds through authorized selling agents, a list of which is available in the Bureau of the Treasury Web site.

The PSALM bonds carry the full, irrevocable, and unconditional guarantee of the Republic of the Philippines through the Department of Finance.

The bonds can also be used as reserve assets of insurance companies.

The proceeds from the bond issuance will be used by PSALM to augment its working capital and support its liability management program.

The issue was jointly managed by the Development Bank of the Philippines, First Metro Investment Corp., and Hongkong and Shanghai Banking Corp.

PSALM was created under Republic Act 9136, the Electric Power Industry Reform Act of 2001, to manage the privatization of the power assets and handle the liabilities of state utility National Power Corp. (Napocor).