The Philippines has successfully priced its first international bond issuance this year, raising 1.2 billion euros from the transaction, the Department of Finance (DOF) said in a statement yesterday.
“This is ROP’s (the Republic of the Philippines) lowest coupon euro issuance and first ever zero-coupon euro issuance in the international capital markets,” Carlos Dominguez, DOF seretary, said.
“The offering garnered significant demand from high quality accounts which allowed us to price a record low euro coupon for the republic,” Rosalia de Leon, national treasurer, said.
“The successful transaction allowed us to diversify our funding program and minimize our funding costs to support productive spending for infrastructure and social services,” she added.
The government sold 600 million euros each tenor for the three-year and nine-year notes, which are expected to settle on February 3, 2020.
“We issued the three-year with a yield of 0.1 percent allowing us to print at a zero percent coupon for a global bond with a spread of 40 bps (basis points) over benchmark,” de Leon said.
“For the nine-year, we achieved a coupon of 0.75 percent which is tighter than the 0.875 percent in our previous eight-year issuance last May 2019 despite the longer tenor,” she added.
“Moreover, given the fair value of our outstanding euro bond due 2027 (with 7.5 years remaining life) being at 67 bps over benchmark, and given a pick up of about five bps for every one year extension, the new nine-year should be priced at around 75 bps, yet we managed to pierce thru our ROP curve by pricing at 70 bps over benchmark. This translates to a negative new issue concession of approximately five bps,” she also said.
According to de Leon, orders came from a diverse group of investors both in the onshore and offshore market, with frequent as well as new names on the books.
“Oversubscription peaked at 3.58 times or more than 4.3 billion euros,” de Leon said.
“We are also reaping the benefits of actively engaging investors prior to going out in the market,” she added.
The DOF said 16 percent of the three-year global bonds were allocated to Asia except the Philippines, four percent to the Philippines, 26 percent to the United Kingdom, 13 percent to Germany, 12 percent to France, five percent to Italy, 10 percent to other European investors, and 14 percent to the US.
In terms of investor type, 68 percent went to asset and fund managers; 22 percent to banks; four percent to central banks, pension funds and sovereign wealth funds; three percent to insurance; and the remaining three percent to private banks and others.
For the nine-year issuance, 16 percent of the bonds were allocated to Asia except the Philippines, six percent to the Philippines, 31 percent to the United Kingdom, 15 percent to Germany, six percent to France, 13 percent to Italy, eight percent to other European investors, and five percent to the US.
In terms of investor type, 54 percent went to asset and fund managers; 18 percent to banks; three percent to central banks, pension funds, and sovereign wealth funds; 24 percent to insurance; and the remaining one percent to private banks and others.
“The overwhelming response from the market for this landmark transaction underscores the international investor community’s deepening confidence in the Philippine economy amid the reforms put in place by the Duterte administration to sustain the country’s high and inclusive growth in the face of the current geopolitical headwinds,” Dominguez said.
He added the issuance of these euro bonds form part of government efforts to diversify funding sources for its investments in infrastructure and human capital development to sharpen the country’s global competitiveness, generate investments and jobs, eradicate poverty and achieve financial inclusion for all law-abiding Filipinos.
Proceeds of the issuance will be used for general government purposes, including budgetary support.
UBS acted as sole global coordinator, joint lead manager, and joint bookrunner for the transaction.
Citi, Credit Suisse, Standard Chartered Bank, and UBS acted as joint lead managers and joint bookrunners.
