Phl launches 25-year global bond offer

MANILA, Philippines - The government launched yesterday a 25-year, dollar-denominated global bond issue, but the exact size of the offer would depend on the bookbuilding process, Finance Undersecretary Rosalia de Leon said.

National Treasurer Roberto Tan earlier said the government may sell anywhere from $500 million to $1.5 billion in new global bonds.

Proceeds of the country’s first fund-raising activity for the year would be used to finance the government’s infrastructure projects as it tries to catch up on lackluster spending last year.

Former Budget Secretary Benjamin Diokno said the government has to spend at least P500 million in infrastructure projects to boost economic growth this year. The government expects gross domestic product (GDP) to expand by five percent to six percent this year from the growth target range of 4.5 percent to 5.5 percent in 2011.

The government has mandated Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC, JP Morgan Chase, Standard Chartered Plc. and UBS AG as joint book runners for the bond offer.

In a separate presentation released by the Investor Relations Office of the Bangko Sentral ng Pilipinas, the government highlighted the country’s strength as an issuer, trumpeting its economic fundamentals and accomplishments in 2011. These include “a strong domestic consumer base, effective monetary policy, strong external payments position, prudent fiscal management, stable banking system and a reform minded administration.”

For the past several years, the Philippines has issued global bonds ahead of its neighbors in the region, usually covering the bulk of its annual foreign debt requirement as early as January.

In the first week of January last year, the government sold $1.25 billion in peso-denominated global bonds. It sold $1.5 billion from a global bond sale also in March last year.

The government plans to borrow $4.02 billion from external sources this year, lower than the programmed $4.5 billion for last year, according to the latest data from the Department of Finance (DOF).

Of the $4.02 billion, the government plans to borrow $2.25 billion to $2.5 billion from the commercial debt market and to borrow $1.77 billion worth of program and project loans.

The 2012 program has a proposed mix of 75 percent and 25 percent, in favor of domestic sources.

The government borrows from the local and overseas debt market to plug its budget deficit.

This year’s budget gap is estimated at P286 billion from a projected P260 billion last year.