Philippines eyes up to $1.5 B global bonds this year

MANILA, Philippines — The Philippines plans to raise between $1 billion to $1.5 billion through another dollar-denominated global bond issuance this year to prefund its foreign obligations maturing in January.

National Treasurer Rosalia de Leon said the government has yet to seek the approval of the Bangko Sentral ng Pilipinas (BSP) for the proposed bond issuance.

“We are looking if we can do another ROP (Republic of the Philippines) deal this year considering that we have a maturity early January. It is more of a preemptive move again to make sure that we will able to have a calmer market when we do issue,” she said.

De Leon said the government has not made any submission to the Monetary Board for the approval in principle because it is still looking at the market.

“We have been talking, the usual consultations with the banks, in terms of the market landscape and pipeline, possibilities of issuing,” she said.

The national treasurer pointed out the government needs to act preemptively given the maturing foreign obligations in January.

“We have an early January maturity. So we are not going to borrow then the following day we have to pay. We have to see when is the best window to be able to generate funds for those maturities,” De Leon said.

De Leon said the government is making sure about the timing of the planned offshore borrowing so as not to compete with other borrowers.

“It could be fourth quarter, third quarter, we also have to discuss it. We don’t want to bump with other issuers in the pipeline so there will be no crowding,” she said.

The government successfully sold $2 billion worth of 10-year global bonds in January amid strong investor confidence.

The debt papers were sold at a coupon rate of three percent, tighter than the initial pricing guidance of 3.3 percent. This also had a spread of 37.8 basis points over the US Treasury rate.

Of the total issuance, the finance department said $750 million was allocated to raise fresh money, while the remaining $1.25 billion was used for a one-day accelerated switch tender offer allowing holders of existing dollar-denominated bonds to swap the debt papers for new bonds or cash.

The government borrows from local and foreign creditors to pay maturing debt and finance its budget deficit, which is targeted at three percent of the country’s gross domestic product (GDP).

Early this month, the Philippines returned to the samurai debt market and sold $1.39 billion in yen-denominated bonds after an eight-year hiatus.

The sale followed the Philippines’ maiden panda bond offer wherein the government raised 1.46 billion renminbi ($230 million) to partially finance the Duterte administration’s massive infrastructure program.

De Leon said the government is looking at tapping anew the samurai and panda bond markets next year.

“We are studying what are the markets that we can also tap so that we are not limited only to global dollar space. So we are looking at possibilities, even right now this early we are also scanning the market because we are already doing our programming for next year,” she said.