RoP kicks off sovereign bond issuance out of Asia in 2018

RoP prices US$2 billion offering to fund country’s infrastructure programme

THE Republic of the Philippines (RoP) kicked off the sovereign bond issuance out of Asia in 2018 when it priced on January 18 a US$2 billion offering, the proceeds of which will be used to help fund the country’s infrastructure programme.

The 10-year US SEC-registered deal was priced at par with a similar coupon and re-offer yield of 3%. This was at the tight end of the final price guidance of between of between 3% and 3.05%, and 30bp inside of the initial guidance of 3.30bp area. This was also equivalent to a spread of 37.8bp over the US treasuries.

The new bonds were offered concurrently with a one-day accelerated switch tender offer for 14 of the RoP’s outstanding US dollar-denominated bonds maturing between 2019 and 2037. This has been the RoP’s trademark liability management exercise, which is in line with its goal of achieving significant cost savings through the reduction of the overall interest expense.

Finance Secretary Carlos Dominguez describes the strong support for the bond offering as a testament to the deepening investor confidence in the country’s newfound status under the presidency of Rodrigo Duterte as one of the world’s fastest-growing economies.

He says the capital raised from the bond float, plus the additional revenue take from the newly-implemented Tax Reform for Acceleration and Inclusion (TRAIN) Law, will help bankroll the government’s programme to modernize the country’s infrastructure, sharpen its global competitiveness and sustain rapid – and inclusive – growth as well as financial inclusion for all Filipinos.

Of the total new issuance, US$1.25 billion was allocated to the participants of the switch tender exercise, while the remaining US$750 million was allocated to new money investors.

The transaction marks the first time the RoP has issued a 10-year US dollar bond since 2014, when it priced a US$1.5 billion offering with a yield of 4.20%.

Citi and Standard Chartered were the joint global coordinators for the new bond issue and dealer managers for the switch tender offer. They also acted as joint bookrunners and lead managers for the new bonds, along with Credit Suisse, Deutsche Bank, Morgan Stanley and UBS.

Date

19 Jan 2018

Channel

Capital Markets

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