Philippine raises $1.39-billion in Samurai bonds

The government on Wednesday returned to the Samurai bond market for the first time in eight years with the issuance of a multi-tranche 154.2-billion-yen ($1.39 billion) Samurai bonds.

“We have just closed our multi-tranche Samurai bond issuing JPY154.2 billion in three years [JPY107.2 billion], five years [JPY6.2 billion], and 10 years [JPY40.8 billion] tenors,” Finance Secretary Carlos Dominguez III said in a statement.

“With overwhelming demand from both onshore and offshore investors, the Republic was able to secure the largest issuance size of a senior Samurai bond for the year,” Dominguez said.

He said the three-year tranche was priced 25 basis points above the benchmark, tighter than that of the recent Panda bonds issuance, which was 35 bps. The five-year tranche was priced at 35 bps, while the 10-year tranche was priced at 60 bps above the benchmark. 

He said coupon was set at 0.38 percent, 0.54 percent, and 0.99 percent for the three-, five-, and 10-year tranches, respectively.

“Overall, the transaction yielded a weighted average spread of 34.7 basis points above benchmark. Compared to our peers, the Republic priced tighter and issued more than Indonesia [JPY100 billion] and higher-rated Mexico [JPY135 billion],” Dominguez said.

The Bureau of the Treasury said the offering marked “the return of the Republic to the Samurai market after an eight-year break and the first time in almost 20 years that it has issued Samurai bonds on a stand-alone basis.”

The government earlier made a presentation on the domestic economy at the Philippine Economic Briefing in June in Tokyo, which was attended by around 500 investors.  

The Philippine delegation of presenters included Dominguez, Economic Planning Secretary Ernesto Pernia, Budget Secretary Benjamin Diokno, Transportation Secretary Arthur Tugade, Public Works Secretary Mark Villar, Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr., Bases Conversion, and Development Authority President Vivencio Dizon and Philippine private sector leaders. 

The event highlighted the Philippines’ strong economic growth profile as one of the fastest-growing economies in the Asia Pacific region, and its robust fiscal position. 

Investors were also informed about the P8.4-trillion ‘Build, Build, Build’ program of the Duterte administration to modernize domestic infrastructure, sharpen the country’s global competitiveness and attract more investments.  

Philippine officials led by National Treasurer Rosalia de Leon also conducted a series of one-on-one meetings with major fixed income investors.  

“This successful return to the Samurai bond market is the latest proof of the deepening investor confidence in the Philippine economy under the Duterte presidency,” Dominguez said.  

He said the government’s disciplined fiscal position, along with game-changing reforms starting with the new legislation―the Tax Reform for Acceleration and Inclusion law―that has modernized and simplified Philippine taxation, created enough room for the current policy of aggressive investments not only in public infrastructure but in human capital formation as well.

“And the strong response to this Samurai float, following a similarly successful offering of Panda bonds in China, underscores the international business community’s increasing interest in investing in the Philippine growth story,” Dominguez said.

The Samurai bonds offering was well received by a good mix of institutional and regional investors – most of whom are new to Philippine credit. These included asset managers, life insurers, trust banks and specialist banks, regional accounts including shinkin banks, non-Japanese accounts, and corporates.

National Treasurer Rosalia de Leon said 2018 was expected to be a trailblazing year for the government in the international capital markets. De Leon said the Samurai bond offering was one way of expanding and diversifying the government’s market access.

“The Republic has a track record of very tight pricing in US dollar markets, and we will be uncompromising in measuring against that benchmark in approaching new markets,” de Leon said.  “Pricing on today’s offering is very compelling and we were able to print the maximum deal size we were seeking,” she said.

Daiwa Securities Co. Ltd., Mitsubishi UFJ Morgan Stanley Securities Co. Ltd., Mizuho Securities Co. Ltd., Nomura Securities Co. Ltd. and SMBC Nikko Securities Inc. acted as joint lead managers and book runners for the issuance.

Topics: Samurai bond market , Finance Secretary Carlos Dominguez III , Bureau of the Treasury , Rosalia de Leon
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