Manila has mandated six banks some time ago for its twin offer of global peso and dollar bonds, IFR, a Thomson Reuters publication, reported citing people familiar with the deal.
The government could proceed with the planned debt sales as early as September, when investors and fund managers have returned from their holidays, a government source said, adding the structure of the deal has yet to be finalized.
Proceeds from the debt sales would be used to retire up to $2.5 billion of sovereign bonds as part of its debt management program, with the remainder to finance Manila’s remaining $500 million external borrowing requirement this year, a central bank source who has seen documents on the bond sale details said.
“It is a good time because market prices have come up, yields are lower, so it is good for the government to borrow, or for any borrower to issue now,” said Noel Reyes, deputy head of financial markets at ING Bank in Manila.
“It seems that the downside is very shallow given liquidity is abundant and looking for yields on the EM (emerging market) side, given that (US) Treasury yields are at an all-time low,” Reyes said.
The government got the go-ahead of the central bank’s policy-making Monetary Board last week to sell up to $1.5 billion 2026 global peso bonds, and as much as $1.5 billion US dollar global bonds via a new 2036 issue or the reopening of an existing 2034 sovereign bond, the central bank source said.
But IFR quoted bankers close to deal as saying the dollar component of the new fund-raising was likely to be smaller than $1.5 billion.
The Monetary Board’s go-ahead was an in-principle approval of an urgent request from the government, the central bank source said, with the debt plan to go through a final approval process later.
The ongoing euro zone sovereign debt crisis and the weakening US economy will likely keep yield-seeking investors shifting money into faster-growing emerging market economies.
“The planned issuances will be well received by the market,” said a Manila-based debt trader.
“With what is happening in Europe and the US, a lot of funds have reduced their exposures to US and Europe, and they are going to EMs, with Philippines included in the basket.”
Citigroup, JP Morgan, Goldman Sachs, HSBC, Standard Chartered Bank and UBS got the mandate for the debt deal, IFR said in its report.
Deutsche Bank, HSBC and UBS were the leads on the 2034 bonds, which was priced at 99.382 and a 6.375 percent coupon for a 6.425 percent yield, or 216.5 basis points over
US Treasuries. The bonds were trading in secondary markets at a cash price of 118-119.
On Monday, two sources with knowledge of the planned debt sale said Manila was considering using the proceeds from a new issue of 15-year global peso bonds to repay costly foreign sovereign bonds and stretch its debt maturities.
The new global peso bonds will be the third for the country since September when it became the first in Asia to join a small club of issuers who have sold bonds abroad in their own currencies.
The Philippines sold $1 billion of 10-year global peso bonds in September 2010 and $1.25 billion of the same bonds with a 25-year maturity in January this year. Both were oversubscribed.
Manila, one of Asia’s largest sovereign issuer of foreign currency debt, has been actively pursuing debt swaps and innovative deals such as the local-denominated global bonds to cut its dependence on foreign borrowing, a move that has earned it praise from credit-rating agencies.
Fitch upgraded Manila to one notch short of investment grade in June, one week after Moody’s Investors Service raised its rating to align with S&P at two rungs below.
Manila concluded last month a record $7.5 billion domestic debt exchange that extended the average maturity of local bonds swapped to 18 years from about 5.5 years.
