The Philippines on Thursday raised $2 billion from the sale of 25-year global bonds that fetched a record low interest rate.
The Bureau of Treasury said the 25-year dollar bonds were sold to yield 3.7 percent, similar to the coupon obtained by the debt instruments the government issued in 2016.
The coupon rate was also lower that the initial price guidance of 3.95 percent and still the lowest coupon ever issued by the Philippine government on a global bond since the 3.95-percent yield in 2015.
“With this transaction, the Republic has extended its excellent track record in executing liability management transactions. The tight pricing we achieved on the new 25-year bond offering, we believe, underscores the confidence of global investors in the Duterte administration,” Finance Secretary Carlos Dominguez III said.
The transaction was the first offshore bond sale under the administration of President Rodrigo Duterte which aims to fund its ambitious infrastructure projects for the country.
Proceeds of the issuance will be used to fund the Philippines’ tender offer and related expenses while the remaining amount will be used for general purposes, including budgetary support.
The inter-agency Development Budget Coordination Committee wants to boost infrastructure spending, reaching 6.8 percent of the gross domestic product in 2018.
The tender offer exercise targeted existing bondholders to switch into the new global bonds. Bonds with a total notional value of $3.56 billion were submitted for the switch tender offer and the Republic accepted a market value of $1.5 billion from the submissions.
“Amidst the volatility in global markets, we have managed to garner robust support from the fixed income investor community, a testament to the resilience of the Philippine economy as well as the strong faith that these investors have in the Duterte administration in executing and implementing reforms and strategies,” said National Treasurer Roberto Tan.
“Once again, the liability management exercise has allowed the Republic to achieve significant cost savings that can be channelled towards productive areas that will benefit the country,” Tan said.
The government hired Citigroup, Credit Suisse, Deutsche Bank, Standard Chartered and UBS as joint global coordinators and bookrunners for the new bond offering.
Fitch Ratings assigned the US dollar-denominated bonds an expected rating of ‘BBB-(Exp)’.
“The Philippines intends to use the proceeds from the bond sale to pay the purchase price and accrued interest of its own securities repurchased in an associated debt management operation. Residual proceeds may be used for general budget financing purposes,” Fitch said.
S&P Global Ratings assigned a ‘BBB’ long-term issue rating to the notes which will constitute direct, unconditional, unsubordinated and unsecured obligations of the Philippines.
Moody’s Investors Service assigned a (P)Baa2 rating to the US-dollar bond offering maturing in 2027/2042.
The Philippines usually issues sovereign bonds in the early part of the year to get favorable borrowing terms.
The 2017 budget, representing an increase of 11.6 percent from 2016, will spend more for infrastructure to support a growth rate of 6.5 percent to 7.5 percent this year.
