PHL raises $3 billion from US dollar bonds

THE PHILIPPINES raised $3 billion from its first US dollar bond issuance for the year, the Bureau of the Treasury (BTr) said on Tuesday. 
The government sold $500 million worth of the 5.5-year notes priced at 4.625% or US Treasuries plus 105 basis points (bps).
It also raised $1.25 billion from the 10.5-year papers priced at 5% or US Treasuries plus 145 bps.
“This was 50 bps tighter than initial price guidance of US Treasury plus 155 and 195 bps, respectively,” the BTr said in a press release.
The government also sold $1.25 billion worth of the 25-year sustainability bonds with a yield of 5.5% or US Treasuries plus 180.7 bps. This was also 45 bps tighter than the initial price guidance.
The bond issuance’s order book peaked at $28.2 billion for all tranches, reflecting “strong interest across all tranches from a diverse pool of high-quality investors, showcasing investors’ confidence in the republic’s credit profile,” the BTr said.
“Due to a strong order book, we were able to compress the price guidance while still upsizing the transaction from an initial target issue size of $2 billion,” the Department of Finance (DoF) said in a statement.
The three-tranche offering, which is expected to be settled on Jan. 17, was launched on Monday at a benchmark size or at least $500 million each.
“Despite high volatility in global credit markets amid the rate hike cycle, the republic took advantage of the improved market sentiments with economic data showing signs of slowing inflation and alleviating concern over US Federal Reserve tightening,” the BTr said.
The US Federal Reserve slowed the pace of rate hikes at its meeting in December. However, two Fed officials on Monday said they see a need to raise rates above 5% and hold them for a long time.
“The robust demand for our first international bond offering in 2023 represents a strong vote of confidence by international investors. It is a testament to the republic’s sound economic fundamentals and the resilience of our economy in the face of volatile global financial markets,” Finance Secretary Benjamin E. Diokno said in a statement.
National Treasurer Rosalia V. de Leon said the reception and tight pricing of the offering “reaffirms the distinction of Philippine credit as a favored proposition even in times of uncertainties.”
Proceeds of the bonds will be used for general budget financing, as well as the financing or refinancing of assets in line with the government’s sustainable finance framework.
BofA Securities, Deutsche Bank, Goldman Sachs, HSBC (B&D), Morgan Stanley, Standard Chartered Bank and UBS acted as joint lead managers and bookrunners. UBS and Standard Chartered were also both designated as sustainability structuring banks.
The dollar bonds were rated “Baa2” by Moody’s Investors Service, “BBB+” by S&P Global Ratings, and “BBB” by Fitch Ratings.
This is the second global bond offering under the Marcos administration, following its first three-tranche dollar bond offering in October, where it raised $2 billion.
The government borrows from external and local sources to fund a budget deficit capped at 6.1% of gross domestic product (GDP) for 2023.
For 2023, the government plans to borrow P2.207 trillion, where 75% is expected to be sourced domestically. The government plans to borrow P1.654 trillion domestically and P553.5 billion from external sources. — Luisa Maria Jacinta C. Jocson