THE Philippine government is tapping the global debt market for the first time this year, offering benchmark-sized dollar and euro bonds to raise fresh funds ahead of “potential uncertainties” in the near future.
The government will issue its benchmark 10-year tranche and a 25-year sustainability bonds with an initial price guidance of 120 basis points above comparable US Treasuries and 6.100 percent area, according to the Bureau of the Treasury (BTr). The transaction is expected to be priced today during New York session.
S&P Global Ratings assigned a BBB+ long-term foreign currency issue rating to the US dollar senior unsecured bonds that the Philippines will be issuing.
“The bonds represent direct, general, unconditional, unsecured, and unsubordinated obligations of the Philippines [BBB+/Positive/A-2]. They rank equally with the sovereign’s other unsecured and unsubordinated debt obligations,” S&P Global Ratings said.
Meanwhile, the Philippines also returned to the euro bond market since April 2021, offering the first-ever euro sustainability bond with a 7-year tenor at 160 basis points above mid-swap area. A concurrent euro tranche may follow at London open, subject to market conditions.
This will be issued under the Republic’s Sustainable Finance Framework, marking the Republic’s seventh G3 ESG bond offering.
National Treasurer Sharon P. Almanza said the Philippines sees an opportune time window to re-enter the capital markets following a constructive market development over the week.
“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,” Almanza said.
“We have constantly communicated our strategies to achieve robust socioeconomic development for the Republic, and hence, we are confident that our investors will remain receptive to the Philippine story,” Finance Secretary Ralph G. Recto said.
The proceeds from the 10-year dollar bonds will be used for general budget financing while proceeds from 25-year dollar and 7-year euro bonds will also be used for general budget financing and to finance/refinance assets in line with the Republic’s Sustainable Finance Framework.
HSBC, Standard Chartered Bank and UBS are acting as Joint Sustainability Structuring Banks. Citigroup, Goldman Sachs, HSBC (B&D), J.P. Morgan, Morgan Stanley, Standard Chartered Bank and UBS are acting as joint lead managers and bookrunners for the transaction.
Last year, the Philippines raised $2.5 billion through the issuance of triple-tranche US dollar global bonds in August and $2 billion from a dual-tranche of dollar-denominated bond offering in May.
This year, the government will borrow $3.5 billion through foreign bond sales, mostly composed of US dollars while the remaining will be in euros.
The borrowing plan is lower than the $4.5 billion program in 2024, as the Philippines will be relying less on the overseas debt market amid high borrowing costs and peso volatility.
“There’s a lot of domestic savings in the Philippines. There’s a lot of liquidity. It’s even cheaper for us to borrow domestically, practically speaking,” the Finance chief had said.
Apart from the Philippines’ usual dollar bond sale, National Treasurer Almanza said the government is also monitoring all currencies, such as the Japanese yen, and keeping its offshore borrowing options open.
The possibility of issuing Sukuk, a Shariah-compliant certificate of investment in assets, is also on the table and it is eyed to be part of the government’s financing plan for the year.
The government will follow an 80:20 borrowing mix this year, of which P507.408 billion will come from external sources while P2.037 trillion will be sourced locally.
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