PHL to raise at least USD 1.5 billion from dollar bonds

THE PHILIPPINE government started the new year with a return to the global bond market via a benchmark-sized US dollar-denominated bond offering.

Documents from the Bureau of the Treasury (BTr) showed the Philippines is looking to raise at least $1.5 billion from the three-tranche offering.

The offering consists of dollar bonds with tenors of 5.5 years, 10.5 years, and 25-year “green” or sustainability bonds of at least USD 500 million each.

This is the second global bond offering under the Marcos administration, which took office in the middle of 2022. In October 2022, the government raised USD 2 billion from the three-tranche US dollar bond offering.

The BTr document showed the initial price guidance for the 5.5-year and 10.5-year tenors are set around the level of Treasuries plus 155 basis points (bps) and 195 bps, respectively.

The price guidance for the 25-year sustainability bonds is set around the 5.95% area.

The Treasury said proceeds of the bonds will be used for general budget financing, as well as the financing or refinancing of assets in line with the government’s sustainable finance framework.

The joint lead managers and bookrunners of the offering are BofA Securities, Deutsche Bank, Goldman Sachs, HSBC (B&D), Morgan Stanley, Standard Chartered Bank and UBS.

UBS and Standard Chartered are both designated as sustainability structuring banks.

The 5.5-year papers will mature in July 2028, the 10.5-year notes in July 2033, and the 25-year sustainability bonds in January 2048.

Moody’s Investors Service assigned the latest dollar bond offering a senior unsecured rating of “Baa2,” which mirrors the Philippine government’s issuer rating.

S&P Global Ratings also assigned a rating of “BBB+” while Fitch Ratings gave it a “BBB” rating.

Aside from the bond offering in October, the government also raised $559 million from a yen-denominated Samurai bond issue in April and sold USD 2.25 billion worth of dollar-denominated notes in March.

The government borrows from external and local sources to fund a budget deficit capped at 6.1% of gross domestic product (GDP) for 2023.

For this year, the government will borrow PHP 2.207 trillion, slightly lower than the PHP 2.212-trillion borrowing plan in 2022.

This year’s borrowing mix is 75:25 in favor of domestic sources. The government plans to borrow PHP 1.654 trillion domestically — of which PHP 1.6 trillion will be from fixed-rate Treasury bonds.

It plans to borrow PHP 553.5 billion from sources outside the country, of which PHP 265 billion will be from bonds and other inflows, and the rest from program and project loans.

The National Government’s outstanding debt rose to a record-high of PHP 13.644 trillion as of end-November. At the end of the third quarter, the outstanding debt as a share of GDP was at 63.7%, the highest in 17 years.