The government successfully tapped the international capital markets for the first time in 2022, with its offering of $2.25 billion worth of 5-year, 10.5-year and 25-year global bonds which marked the country’s first triple-tranche offering.
National Treasurer Rosalia de Leon said the global bonds were the first and largest offshore Southeast Asia sovereign offering this year.
The new 5-year global bonds were priced at US Treasury spreads of T+ 90 basis points with a coupon of 3.229 percent, after an initial price guidance of T+ 125 bps area, while the new 10.5-year global bonds were priced at T+ 125 bps and a coupon of 3.556 percent, after an initial price guidance of T+ 165 bps area.
Meanwhile, the new 25-year global bonds were priced at 4.200 percent, or 50 bps tighter than initial price guidance of 4.700 percent area.
The 25-year global bonds were issued under the Republic’s Sustainable Finance Framework and represents the debut ESG global bond offering.
“The fact that our debut sustainability bond tranche secured the strongest demand among the three tranches highlights the strong investor confidence in the national government’s commitment to achieving sustainable development and mitigating climate change, notably the pledge to reduce our greenhouse gas emissions by 75 percent by 2030,” said Finance Secretary Carlos Dominguez.
Dominguez said the debut sustainability bond float not only attracts the private sector-based investment needed to finance the climate change mitigation and adaptation projects in the Philippines, but also allows the government to attract funds from ESG-conscious investors and boost the development of the sustainable financing market in the Philippines.
The global bonds are expected to be rated Baa2 by Moody’s, BBB+ by Standard & Poor’s and BBB by Fitch.
The transaction is expected to settle on March 29.
After a few weeks of volatility in the global equity and credit markets, the government took advantage of the improving market sentiment post the March FOMC meeting and announced the transaction on March 21.
It follows the $3 billion dual-tranche global bond offering in June 2021, the EUR 2.1 billion triple-tranche global bonds in April 2021 and JPY 55 billion Samurai bond offering in March 2021.
Finance Undersecretary Mark Dennis Joven said the successful transaction is a testament to the Republic’s strong economic fundamentals and the confidence of the investor community in the country’s long term growth trajectory.
“Despite volatility in the global markets, we have received overwhelming interest across all tranches, and especially on our first sovereign ESG bond issuance. The upsized issuance backed by a significantly oversized order book provides an overwhelming affirmation to the Administration’s continued prudent fiscal and economic management amidst the pandemic,” said Joven.
De Leon said the strong investor reception across all tranches underscores the Republic’s unfettered access to the international capital markets.
“Being the first and largest offshore Southeast Asia sovereign offering in 2022, the Republic’s transaction has reopened the Asian bond markets for long-dated offerings and cements the Republic’s position as the leading capital market participant in Asia,” de Leon said.
Proceeds from the 5-year and 10.5-year global bonds will be used for the government’s general purposes, including budgetary support, while the proceeds from the 25-year global bonds will be for the general budget financing and to finance/refinance assets in line with the Sustainable Finance Framework.
Bank of China, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Mizuho Securities, Morgan Stanley, Standard Chartered Bank and UBS were the joint bookrunners for the transaction.
Vigeo Eiris provided a second party opinion on the Sustainable Finance Framework. Standard Chartered Bank and UBS were sustainability structuring advisors.