The Republic of the Philippines returned to the G3 bond market for the third time this year as it priced on December 2 a dual-tranche offering totalling US$2.75 billion.
The SEC-registered deal comprises of US$1.25 billion for 10.5 years, which was priced at par with a similar coupon and re-offer yield of 1.648%. This was equivalent to a spread of 70bp over the US treasuries, or 30bp tighter than the initial price guidance of 100bp area.
The other tranche is for US$1.50 billion for 25 years, which was also priced at par with a similar coupon and re-offer yield of 2.65%. This was 35bp inside of the initial price range of 3% area.
With just a few weeks left before the end of the year, the sovereign was able to take advantage of the constructive market backdrop post-US election and announced the transaction on December 2. The positive news on the Covid-19 vaccine trials over the past couple of weeks has created strong inflows in Asia-Pacific credit markets, and allows the RoP to capitalize on favourable market dynamics.
Finance Secretary Carlos Dominguez says the success of the latest RoP foray into the offshore bond market underpins the international investor community’s recognition of the Philippine economy’s strong fundamentals despite the global downturn caused by the Covid-19 pandemic. He notes that the country’s prudent fiscal management and bold economic reforms are paying off.
“These initiatives have given the government headroom to spend on Covid-19 response even as it sustains its aggressive spending on infrastructure and other priority programmes to revive the economy amid the global slowdown,” Dominguez adds.
The deal follows the RoP’s US$2.35 billion dual-tranche offering of 10 years and 25 years priced in April and the 1.20 billion euro (US$1.46 billion) dual-tranche issuance of three years and nine years printed in January, which also represented the first-ever zero-coupon bond by the sovereign in the international capital markets.
The latest bond garnered a total order book of US$6.5 billion with the 10.5-year tranche attracting US$2.9 billion worth of demand from 139 accounts. In terms of geographic distribution, 54% of the bond was allocated in Asia, 25% in Europe and 21% in the US. By type of investors, fund managers accounted for 56% of the paper, banks 27%, insurance companies and pension funds 13%, central banks and sovereign wealth funds 3% and private banks 1%.
The 25-year bond generated a bigger order book of US$3.6 billion from 177 accounts, with 41% distributed in Asia, 30% in the US and 29% in Europe. Fund managers also drove this tranche as they took 76% of the bond, insurance companies and pension funds 13%, banks 7%, central banks and sovereign wealth funds 3% and private banks 1%.
Proceeds from the offering is earmarked for general purposes, including budgetary support. Credit Suisse, Daiwa Capital Markets, Deutsche Bank, Morgan Stanley, Standard Chartered and UBS were the joint bookrunners for the transaction.