Duterte’s 1st foreign borrowing signals investor confidence in PH – Dominguez

MANILA, Philippines – The Philippines’ $2-billion global bond sale this week signals the continuing investor confidence in the country’s economy and the administration of President Rodrigo Duterte’s resolve to carry out reforms for high and inclusive growth, said the country’s finance chief.

Finance Secretary Carlos Dominguez III said the tight spread achieved in this latest international bond transaction, in which the Philippines sold $2 billion worth of 25-year global bonds at a record-low yield of 3.7%, “indicates the market’s very positive perception of the country’s strong leadership and its economic performance and prospects, which is way ahead of the official risk ratings assigned to the Philippines by credit rating agencies.”

“I look at these results as a manifestation of the confidence of global investors in the leadership of the new administration, which has committed to pursue sound economic management and reforms to improve economic competitiveness, productivity, and living standards, as well as drastically reduce poverty,” he said in a statement on Friday, January 20.

Dominguez issued the statement following the Philippines’ successful issuance last Thursday, January 19, of the 25-year bond offering, which was oversubscribed and whose pricing achieved a historical record.

ROP bonds are issued by the government in foreign currencies.

“I am very pleased with the highly successful outcome of the international ROP bonds offering launched yesterday, the first under the Duterte administration. It was very well received by the international capital markets and generated a new record for the republic,” Dominguez said.

Against the United States Treasury benchmark, the spread of the bonds is the tightest for a 25-year ROP and the coupon of 3.7% was equal to a similar issue last year.

“We accepted the $2 billion for new cash and bonds switch in accordance with our international capital fund raising program for 2017,” the finance chief said.

“With this transaction, the Republic has extended its excellent track record in executing liability management transactions,” Dominguez added.

Amid volatililty in global markets

Amid the volatility in global markets, National Treasurer Roberto Tan said the Philippines has “managed to garner robust support from the fixed income investor community, a testament to the resilience of the Philippine economy as well as the strong faith that these investors have in the Duterte administration in executing and implementing reforms and strategies.”

“Once again, the liability management exercise has allowed the Republic to achieve significant cost savings that can be channeled towards productive areas that will benefit the country,” Tan said.

The successful return of the Philippine government to the international capital markets was in conjunction with a one-day Accelerated Switch Tender Offer for 14 series of US dollar bonds maturing between 2019 and 2037, amounting to $19 billion in total notional value.

Order books for the new 25-year global bond offering were approximately $4.5 billion. 

By geographical allocation, 33% came from Asia, 24% from the US, and 43% from Europe. (READ: PH economy seen to grow ‘as much as 8%’ in 2017)

The global issuance was the first international capital markets transaction for the Duterte administration. 

Dominguez said proceeds of the issuance will be used to fund the Philippines’ tender offer, and related expenses while the remaining amounts will be used for general purposes, including budgetary support.

The tender offer exercise targeted existing bondholders to switch into the new Global Bonds, the finance department said.(READ: Due to Trump? Filipinos in U.S. sending more money home)

Citigroup, Credit Suisse, Deutsche Bank, Standard Chartered Bank, and UBS acted as joint global coordinators, dealer managers, and bookrunners for the transaction. – Rappler.com