Another robust year seen for corporate bond issues

MANILA, Philippines - Philippine Dealing and Exchange Corp. (PDEx), the country’s trading platform for fixed income securities, expects another robust year in terms of corporate bond issuance.

More than P80 billion of bonds are seen to be listed in the PDEx as companies raise fresh funds to support capital intensive infrastructure projects, the top PDEx executive said.

“We should be able to see better numbers than last year. Based on the projected demand from the corporate bond issuers, we may be able to equal or be better [than last year’s numbers],” said PDEx president and chief operating officer Cesar Crisol.

In 2013, eight firms issued 16 series of long-term bonds totaling P83.5 billion. Major issuers include property giant Ayala Land Inc. (P21 billion), power distribution giant Manila Electric Co. (P18.5 billion) and conglomerate GT Capital Holdings Inc. (P10 billion).

Crisol said companies prefer to raise funds through bonds “especially now that there is focus on infrastructure projects.”

The implementation of Basel III also encourages banks to invest in corporate bonds, which carry a lower risk rating compared with other instruments, Crisol said.

Basel III introduces a complex package of reforms designed to improve the ability of bank capital to absorb losses, extend the coverage of financial risks, and have stronger firewalls against periods of stress.

“Hopefully this will augur well for the capital markets. More instruments will be made available to the investing public,” Crisol said.

Crisol said PDEx expects several long-term bond issuance that will support infrastructure projects. The government plans to roll out and award more Public-Private Partnership (PPP) projects this year.

As of end-2013, 21 corporate bond issuers and 59 securities worth P344.53 billion were listed in the PDEx. Last month, the Gotianun family’s Filinvest Development Corp. listed P8.8 billion worth of fixed-rate bonds in the PDEx.

For Standard Chartered, an arranger of capital raising projects, 2014 will be a busy year given strong activity in the Philippine economy.

“A lot of things will keep us busy this year...the Philippines is in a very good place because the fundamentals are intact and strong and there are lots of liquidity,” said Mahendra Gursahani, CEO and head for consumer banking of Standard Chartered.

Gursahani said there are lots of good PPP infrastructure projects like the North Luzon Expressway and South Luzon Expressway Connector Road that will be implemented starting this year, hence, the need for fresh funds.

The Philippine Stock Exchange is looking to merge the country’s equities and bond markets this year. The Bangko Sentral ng Pilipinas and the Department of Finance earlier said they are supporting the proposed unification to enhance liquidity in the financial market.

“Of course the consolidation of operations would be good for the capital market,” Crisol said.