Government raises $1.25 B from global peso bonds

MANILA, Philippines –  The Aquino administration has raised $1.25 billion or P54.77 billion through the sale of 25-year peso-denominated global bonds on Wednesday night, marking the government’s first fund-raising activity for the year.

In a statement, the Investor Relations Office (IRO) of the Bangko Sentral ng Pilipinas (BSP) said the government was able to take advantage of “favorable market conditions and a low interest rate environment at the start of the year.”

Finance Secretary Cesar Purisima believes the reception of the market to the bond offering – with tenders reaching some $3 billion – is a testament of investor confidence in the Aquino administration. “We are pleased with the recent offering. We consider it another milestone,” Purisima said.

The IRO said that the newly issued US SEC-registered bonds, which were priced at par with a yield of 6.250 percent, will mature in January 2036.

The bonds are peso-denominated but will be settled offshore and payable in dollars. The conversion rate for the bonds at pricing was P43.777 to $1.

“The active investor participation investor allowed us to continue our strategy of lengthening debt maturities and reduce exposure to foreign exchange risk,” Purisima said, adding that the sale will set a benchmark for future infrastructure projects of the Aquino administration.

The bookbuilding process attracted over 160 investors. The offering priced at the tight end of the range. By geographical allocation, 21 percent of the bonds were allocated to Asia, 46 percent to the US and 33 percent to Europe.

When asked if the government would still be issuing dollar-denominated bonds this year following the successful debt sale of the peso-denominated global bonds, Purisima said it all depends on market conditions.

“We’re continuing to look at the market with opportunistic eyes. When the opportunity is there to do so, we will continue to do so,” he said.

Proceeds of the bond sale would be used for its budgetary operations and refinancing needs.

The government is eyeing to contain the budget deficit at P290 billion this year.

This is the second peso-denominated global bond sale of the Aquino administration, having successfully sold $1 billion in global peso bonds in September last year.