The Philippines successfully returned to the international capital markets for the second time this year with the issuance of 2.1-billion-euro (P122 billion), four-year, 12-year and 20-year global bonds to support the government budget, the Department of Finance said Thursday.
Finance Secretary Carlos Dominguez said in a statement the successful issuance “reflects the investor community’s confidence in the country’s prospects for a strong recovery from the prolonged pandemic, given that its financial readiness has allowed the government to do whatever COVID-19 response measures are necessary to save lives and revive the economy.”
“Investors apparently believe we have what it takes to ride out the COVID-19 crisis on the strength of the fiscal discipline that has been maintained and the tax measures plus other reforms that have been carried out by the government since President Duterte assumed office five years ago,” he said.
The DOF said the new four-year bonds “were priced at 4Y EUR Midswaps +75 bps and coupon of 0.250 percent, while the new 12-year bonds were priced at 12Y EUR Midswaps +105 bps and coupon of 1.200 percent.”
“Also, the new 20-year bonds were priced at 20Y EUR Midswaps +135 bps and coupon of 1.750 percent. All tranches tightened by 25 bps [basis points] from the initial price guidance backed by a strong order book which allowed the Republic to revise its price guidance twice across all three tranches,” it said.
The transaction marked the largest euro transaction and the first triple-tranche euro offering from the Philippines. The 20-year bonds also represent the Republic’s longest ever euro tenor and the Republic’s largest individual euro tranche.
“The global bonds are expected to be rated investment grade Baa2 by Moody’s, BBB+ by Standard & Poor’s and BBB by Fitch,” it said. The transaction is expected to settle on April 28, 2021.
The transaction was priced on April 21, 2021. It followed the government’s 55-billion-yen Samurai bond offering in March.
Finance Undersecretary Mark Joven said the euro bond market proven to be an attractive and sustainable funding source for the Philippines on top of the usual peso, dollar and Japanese yen issuances.
National Treasurer Rosalia de Leon said the success of the euro deal—the government’s fourth offering since the pandemic—served as affirmation that the country was on track to emerge from the health crisis as a stronger and more resilient economy.
“Further, the ability to stretch our maturities to the 20-year tenor at tight pricing underscores that investors are indeed taking a long view on our return prospects,” de Leon said.
BNP Paribas, Credit Suisse, Goldman Sachs, J.P. Morgan, Nomura and Standard Chartered Bank acted as joint lead managers and joint bookrunners for the transaction.
Credit watchers S&P Global Ratings and Fitch Ratings assigned investment-grade scores to the euro bond issuance.
The Department of Finance has secured a total of $17.06 billion in affordable financing from external sources in 2020 for key infrastructure projects and other priority programs, and for helping bridge the wider fiscal deficit incurred last year because of the huge state spending on COVID-19 response measures.