Wednesday, 15 July 2009

Philippines raises $750M from global bond offer

Gov’t says issue ‘nearly 6 times oversubscribed’
By Ronnel Domingo
Philippine Daily Inquirer

MANILA, Philippines—The government on Tuesday raised $750 million or about P36.2 billion through the issuance of 10-year global bonds.

Finance officials said the commercial bond issue was “nearly six times oversubscribed,” showing healthy investor interest in the debt paper.

The bonds were priced at 99.065 percent to yield 6.625 percent, or 332.6 basis points higher than the benchmark US treasury bond rate.

Of the total amount raised, 60 percent came from Asia, a quarter from the United States and 15 percent from Europe.

This is the second international outing for the government following the debut offering of $1.5 billion in January.

“We are very pleased with the results of the transaction, it represents the lowest yield we have ever achieved in a 10-year benchmark (dollar-denominated) global offering,” National Treasurer Roberto B. Tan said.

Finance Secretary Margarito B. Teves said the strong investor response reflected the continued confidence in the policies and economic management of the government, particularly in responding to the global economic crisis.

Citibank, Credit Suisse and Deutsche Bank acted as joint lead managers and joint bookrunners for the transaction.

The issuance of the global bonds came in the wake of a revision by government economic managers of the budget deficit program to P250 billion from the most recent target of P199 billion.

The revision was due to the downscaling of the economic growth target to between 0.8 and 1.8 percent from a range of 3.1 to 4.1 percent.

International credit watchers assigned the latest Philippine government issue varying degrees of noninvestment grade ratings.

Fitch Ratings gave it a ‘BB’ rating, which meant that the bond is more prone to changes in the economy. The rating has a “stable” outlook.

Fitch expressed concern over the continued weak revenue performance of the Philippine government, “implying an underlying structural fiscal weakness which needs to be addressed in addition to the cyclical deterioration and in spite of the improvement in the overall fiscal balance in recent years.”

Standard & Poor’s gave the issue a ‘BB-’ rating or about the same as Fitch’s except for the negative qualifier, which denotes the likelihood of a downgrade.

“The sovereign credit ratings on the Philippines derive support from the apparent resilience of the sovereign’s external accounts, whereby an improving liquidity position continues to lower external liquidity risk despite the extremely challenging external environment,” S&P said.

Moody’s Investors Service gave the worst rating of ‘B1’ with a positive outlook, which means the bond issuance was speculative and subject to high risk although this was likely to be upgraded.

“The positive rating outlook was affirmed in early 2009, taking into account the resiliency evident in the country’s balance of payments and financial system in face of the global recession,” Moody’s said. “At the same time, it factors in the strained state of public finances.”

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