The government expects to save about P2.4 billion in interest expense on the first year following the success of its latest debt swap, which attracted total tenders of P388 billion or nearly four times the targeted amount.
In a statement on Tuesday, the Department of Finance (DOF) said tenders for benchmark bonds due 2025 amounted to P134 billion, while tenders for benchmark bonds due 2040 reached P254 billion.
Submissions for new subscription offers for the 2025 bonds reached approximately P21 billion.
The DOF said the total transaction over the indicated minimum issue size of P50 billion per tranche was oversubscribed by at least 3.88 times.
It said the strong response allowed the government to price the 2025 bonds and 2040 bonds at the minimum coupon rates of 3.625 percent and 4.625 percent, respectively.
The government accepted total exchange offers of eligible bonds of about P237 billion and new subscription offers of about P9.6 billion in the 2025 bonds.
“The domestic bond exchange transaction forms part of the Republic’s liability management program to establish liquid benchmarks to promote liquidity and generate interest expense savings,” the DOF stated.
It said the debt swap will result in interest expense savings of about P2.4 billion in the first year which can be used by the government for initiatives that will help sustain the country’s economic growth.
The average coupon of accepted bonds decreased by 132 basis points as a result of the transaction, while eligible bonds accepted and exchanged into the new benchmark bonds had their average maturity lengthened by 10.7 years.
Finance Secretary Cesar Purisima said the transaction will help the government achieve its debt management objectives.
“Amid turbulence around the world, the overwhelming response we received from the market is an unequivocal show of strength and stability on the part of the Republic. With the introduction of two tranches of exit bonds this year, the Republic continues to provide innovative solutions in line with investors’ needs,” he said.
“We are very pleased with the unwavering support from the market. We will continue to work with investors to ensure that the Republic maintains an efficient debt portfolio while achieving competitive funding rates,” Treasurer of the Philippines Roberto Tan said.