AEON Credit’s P1 billion bonds first in Philippines with CGIF backing

MANILA, Philippines — A P1 billion bond issuance by a local financing firm, proceeds of which would provide livelihood and consumer loans for the underbanked, has been guaranteed by the Credit Guarantee and Investment Facility (CGIF), an entity established by several Asia Pacific countries.

The bond issued by AEON Credit Service (Philippines) Inc. is the first in the Philippines to be guaranteed by CGIF under the ASEAN+3 Multi-Currency Bond Issuance Framework (AMBIF).

The CGIF was established in 2010 by the 10 members of the Association of Southeast Asian Nations along with China, Japan and Korea (ASEAN+3) with the Asian Development Bank to provide guarantees on local currency-denominated corporate bonds issued in the region.

AMBIF, in turn, is a set of common market practices including standard bond issuance documentation that allows borrowers to tap different markets using the same paperwork and processes.

This framework was created under the Asian Bond Markets Initiative (ABMI), a joint effort by ASEAN+3 to promote local currency bond market development. The Securities and Exchange Commission adopted the framework from its inception in September 2015.

The proceeds of AEON Philippines’ bond issuance would be used to provide tricycle loans, personal loans, as well as financial services for the purchase of consumer products such as home appliances, furniture and electronics. The target clientele would be those who are unbanked as well as those who have limited access to financial services.

This issuance would be offered in two tranches that would mature in 2021 and 2023.

AEON Philippines is part of the AEON Group of Companies through Japan-based bank holding company AEON Financial Service Co., Ltd.

ADB chief economist Yasuyuki Sawada said the provision of guarantee by CGIF to a Philippine bond may pave the way for similar bond issuances in the future.

“We hope that this pilot bond will pave the way for similar bond issues going forward,” he said in a statement. “Vibrant local currency bond markets provide valuable alternative sources of funding for companies while borrowing in local rather than foreign currencies strengthens the overall stability of the domestic financial sector.”

Aside from being a contributor to the CGIF, the ADB is also the secretariat to the ABMI. The CGIF, AMBIF, and ABMI were established to support the development of active long-term local currency bond markets so borrowers can avoid the currency and maturity bond mismatches that caused the 1997–1998 Asian financial crisis.

Ephyro Luis Amatong, supervising commissioner for markets and securities regulation at the SEC, said the issuance would also contribute to attaining greater financial integration within ASEAN.

“We welcome the first CGIF-guaranteed AMBIF bond in the Philippines. The issuance not only supports the development of the Philippine bond market but also ASEAN’s efforts toward financial integration,” he said.

The CGIF has so far received capital contributions of $700 million from ADB, ASEAN, China, Japan and Korea.

It provides guarantees for bonds issued by investment grade companies in ASEAN+3 countries which would otherwise have difficulty tapping local bond markets to secure longer-term financing.