THE Philippines raised $2 billion at a record low rate in a successful return to the international capital markets, the government announced on Thursday.
The 25-year dollar bonds were sold at a yield of 3.70 percent, the lowest ever coupon for a Philippine offering. It was also lower than the initial pricing of 4 percent and the 3.95 percent yield for an identical issuance last year.
Of the proceeds, $1.5 billion will be used to switch and retire old bonds under a buyback program announced along with the offering, while the remaining $500 million will be used for general purposes.
The order book for the offering totaled $8 billion, 32 percent of which came from Asia, 51 percent from the United States and 17 percent from Europe.
“This is a fantastic result for the republic,” HSBC Philippines President and Chief Executive Officer Wick Veloso said.
The transaction was the first sovereign US dollar bond issuance and the longest-dated US dollar bond issuance from Asia this year, the Department of Finance said in a statement.
The government’s track record in executing liability management transactions, Finance Secretary Cesar Purisima claimed, underpins a firm commitment to proactive risk management.
“By leveraging on these opportunities to reduce high-coupon debt and to extend the maturity of our debt portfolio, the country achieves valuable savings that we can use to target broad-based and inclusive growth and development,” he said.
Purisima noted that the January 2015 issuance of 25-year papers, during which the Philippines also raised $2 billion, was awarded Best Philippines Deal and Best Sovereign Bond by FinanceAsia last month. He said the citation underscored reforms that had made the country one of the region’s most resilient economies.
National Treasurer Roberto Tan said the government had been closely monitoring market conditions to ensure that it could navigate a challenging and volatile environment.
“The strong support that we received from our investors in this transaction is a sign of confidence in the reforms and strategies that the Republic has institutionalized,” he said.
Citigroup, Deutsche Bank, HSBC and Standard Chartered Bank served as joint global coordinators and dealer managers for the transaction. Credit Suisse, J.P. Morgan, Morgan Stanley and UBS joined the four as joint bookrunners.
“Although market volatility has made capital markets funding more challenging, the pricing for the new transaction makes clear that investors continue to have strong demand for the Philippines’ credit given its resilient and improving credit story,” HSBC’s Veloso said.