Gov’t raises $2 B in 1st bond sale

MANILA, Philippines - The Philippines successfully sold $2 billion in 25-year global bonds at a rate of 3.7 percent, marking the first fund-raising activity of the Duterte administration.

“With this transaction, the country has extended its excellent track record in executing liability management transactions. The tight pricing we achieved on the new 25-year bond offering, we believe, underscores the confidence of global investors in the Duterte administration,” Finance Secretary Carlos Dominguez said.

The rate is within the lower end of the guidance of 3.7 percent to 3.75 percent.

Proceeds will be used to fund foreign currency denominated bonds and budgetary support on the back of the Duterte administration’s plan to usher in the golden age of infrastructure.

National Treasurer Roberto Tan added that amidst the volatility in global markets, the government managed to garner robust support from the fixed income investor community.

“This is a testament to the resilience of the Philippine economy as well as the strong faith that these investors have in the Duterte administration in executing and implementing reforms and strategies. Once again, the liability management exercise has allowed the Republic to achieve significant cost savings that can be channelled towards productive areas that will benefit the country,” Tan said.

Commenting on the transaction, BPI Capital Corp. managing director and COO Reggie Cariaso said positive investor reception reflected confidence in the new administration.

“The outcome is very good and (shows) investor vote of confidence in the Philippines,” Cariaso said.

The new bonds will be settled on Feb. 2.

Aside from the new bonds, the government will also implement a debt liability management to exchange 14 earlier issued bonds maturing between 2019 and 2037.

“The Philippines intends to use the proceeds from the bond sale to pay the purchase price and accrued interest of its own securities repurchased in an associated debt management operation. Residual proceeds may be used for general budget financing purposes,” Fitch said.

S&P said its ratings on the country “reflect our assessment of the country’s lower middle-income economy and rising uncertainties surrounding the stability, predictability, and accountability of its new government.”

”Offsetting these weaknesses is the Philippines’ strong external position, which features rising foreign exchange reserves and low and declining external debt,” it also said.

S&P’s rating in the country has a Stable outlook “to reflect our view that a higher rating is unlikely over our two-year ratings horizon.”

“We may raise the ratings on the Philippines if continued fiscal improvements under the new administration boost investment and economic growth prospects, or if improvements in the policy environment lead us to a higher assessment of institutional and governance effectiveness,” it said.