The Philippines on Wednesday launched a $2-billion global bond sale to help finance the government’s 2017 budget and repay foreign debt.
The Bureau of Treasury said in a notice the country offered 25-year Republic of the Philippines bonds which are dollar-denominated.
“The bond sale proceeds will be used to finance President Rodrigo Duterte’s record P3.35 trillion [budget] and repay foreign debts,” National Treasurer Roberto Tan said in a report.
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.
“Our sovereign credit ratings on the Philippines reflect our assessment of the country’s lower middle-income economy and rising uncertainties surrounding the stability, predictability, and accountability of its new government. Offsetting these weaknesses is the Philippines’ strong external position, which features rising foreign exchange reserves and low and declining external debt,” S&P said.
The coupon rate of the bond sale has yet to be announced but the price guideline was set at 3.95 percent which will mature in 2042.
Moody’s Investors Service assigned a (P)Baa2 rating to the US-dollar bond offering maturing in 2027/2042.
The government hired Citigroup, Credit Suisse, Deutsche Bank, Standard Chartered and UBS as joint global coordinators and bookrunners for the new bond offering. The SEC-registered deal will price as early as today.
The banks will also serve as dealer-managers for a tender offer for certain of the RoP’s outstanding bonds. Holders who tender their bonds will be given priority if they want to subscribe to the new issue.
The Philippines usually issues sovereign bonds in the early part of the year to get favorable borrowing terms. Tan said of the $2 billion, $500 million would be used to finance this year’s P3.35 trillion national budget and the rest would be used for liability management.
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.
The government plans to raise a total of P126.26 billion by selling global bonds and from official development assistance loans. It also plans to raise P505.03 billion via treasury bills and bonds.
“It has always been our tradition. So we will continually monitor the market, assess whether it is the right time in the past almost always we hold it either in the first or second month. It is only this year that we held it in the second month,” Tan told reporters earlier.
“We always consider liability management as a package with the new money so hopefully there is an opportunity for both transactions to be launched back to back,” he said.