THE Republic of the Philippines (RoP) accessed the international capital markets for the second time this year as it priced on April 27 a dual-tranche offering totalling US$2.35 billion to help fund measures designed to mitigate the impact of the Covid-19 pandemic.

The US SEC-registered transaction comprised of a 10-year tranche amounting to US$1 billion, which was priced at par with the similar coupon and re-offer yield of 2.457%. This represented a spread of 180bp over the US treasuries, or 40bp inside the initial price guidance of 220bp area.

The other tranche was a 25-year bond amounting to US$1.35 billion, which was also priced at par with a similar coupon and re-offer yield of 2.95% - or 42.5bp tighter than the initial range of 3.375% area. This was equivalent to a spread of 169.1bp over the US treasuries. At these levels, the coupons were the lowest ever achieved by the RoP for the 10-year and 25-year offerings, according to national treasurer Rosalia de Leon.

Capitalizing on a short favourable market window amid the broader volatility arising from concerns over the Covid-19 pandemic, the RoP launched the opportunistic trade following a constructive week in the Asia-Pacific credit markets – illustrating its ability to navigate a challenging global environment and respond efficiently to capture conducive market conditions.

Finance Secretary Carlos Dominguez III says the strong demand for the bond issue demonstrates the resiliency of investor interest in the Philippine economy despite the global economic fallout from the Covid-19 pandemic. The proceeds will be used for budgetary purposes and support the government’s four-pillar strategy to mitigate the impact of the global health crisis.

The four pillars include the provision of immediate financial support to millions of the most vulnerable families as well as employees of small businesses; mobilizing resources to support the frontline health workers and increase the country’s testing capacity; providing liquidity and support to the economy; and putting in place an economic recovery plan that is responsive to the needs of consumers and businesses to create jobs and sustain growth.

For De Leon, the deal outcome amid the Covid-19 pandemic fear “makes the Philippines, at least for the time being, a diamond in the sovereign issuance space for being able to convert immense pressure into an opportunity to dazzle in brilliant shine.”

The transaction garnered a combined order book of US$9 billion, with each tranche attracting US$4.5 billion apiece. In terms of geographic distribution, the 10-year bonds were sold 45% in the US, 28% in Asia and 27% in EMEA. By type of investors, asset and fund managers accounted for the bulk of the paper at 80%, with the remaining 10% sold to banks, 9% to insurance companies, pension funds and official institutions, and 1% to private banks and other investors.

The 25-year bonds were allocated 53% in the US, 27% in Asia and 20% in EMEA. Asset and fund managers were likewise the biggest buyers with 66%, followed by insurance companies, pension funds and public institutions with 27%, banks 6% and private banks and other investors 1%.

Citi, Credit Suisse, Goldman Sachs, Morgan Stanley, Standard Chartered and UBS acted as the joint bookrunners for the transaction.

The RoP previously tapped the international capital markets in January this year with a 1.2-billion euro (US$1.30 billion) dual-tranche offering, equally split at 600 million euro each, featuring its first ever zero-coupon euro-denominated bond for three years. The other tranche has a tenor of nine years.