Philippines launches global bond offer

The Philippines on Thursday launched its offer of dual-tranche US-dollar global bonds, as well as a euro sustainability bond, marking its first foray in the international debt market this year.

In a statement, the Bureau of the Treasury (BTr) announced its 10-year and 25-year fixed-rate global bonds and seven-year euro sustainability bonds.

“This marks the Republic’s first ever EUR (euro) sustainability bond and also marks the Republic’s return to EUR bond markets since April 2021. The USD (US dollar) 25-year Global Bond and EUR 7-year will be issued under the Republic’s Sustainable Finance Framework,” the Treasury said in a statement.

National Treasurer Sharon P. Almanza said in a Viber message that the government is targeting to offer benchmark-sized bonds.

Benchmark-sized issues are typically worth at least USD 500 million.

The Treasury said proceeds from the sale of the 10-year dollar bonds will be used for general budget financing.

Proceeds from the 25-year dollar and seven-year euro sustainability bonds will be used to refinance assets in line with the Philippines’ Sustainable Finance Framework.

“The initial price guidance (IPG) of USD 10-year and 25-year tranches were announced at Treasuries +120 basis points (bps) area and 6.100% area respectively, while the IPG of the EUR 7-year tranche was announced at MS (mid-swap) +160 bps area,” the Treasury said.

The transaction was scheduled to be priced during the New York session on Thursday.

“With a constructive market developing over the week, we see an opportune window for the Republic to re-enter the capital markets. Our goal is to capitalize on the current market momentum to secure the most efficient cost dynamics ahead of potential uncertainties in the near future. We look forward to the continued support of our valued investors,” Ms. Almanza said in a statement.

Citigroup, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Standard Chartered and UBS are the joint lead managers and joint bookrunners.

HSBC, StanChart and UBS are also joint sustainability structuring banks.

A trader said in a text message that demand for the global bond offering could reach up to USD 2 billion.

“I think this is just for refinancing of a maturing dollar bond,” the trader added.

According to Bloomberg News, the Philippines has about USD 1.5 billion in dollar bonds that will be due in March and €650 million in euro-denominated debt in April.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the bond sale could be attractive for investors looking for higher returns as US Treasury yields are elevated.

“We expect strong demand from foreign investors who are looking to take advantage of yield pickup,” the trader likewise said.

“Thus, bids/demand from international investors could be relatively higher, thereby could still lead to lower yields/borrowing costs for the National Government,” Mr. Ricafort added.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas, on the other hand, said in a Viber message that the government could raise “USD 3.5 billion and even up to USD 5 billion” from the global bonds.

“The timing could be right as the US 10-year yields are taking a breather,” he added.

Fitch Ratings has assigned the Philippines’ proposed US dollar and euro bonds with a “BBB” rating, same as its sovereign credit rating.

S&P Global Ratings also rated the bonds with a “BBB+,” which matched the Philippines’ sovereign credit rating.

Finance Secretary Ralph G. Recto said last week the Philippines is looking to raise USD 3.5 billion this year from the international debt market, most of which will be in dollars. — A.M.C. Sy with Bloomberg