Dollar Bond Sale Raises $500M

 

Strong Demand From Local Investors

November 28, 2012, 5:57pm

The government raised $500 million from the sale of 2023 US dollar-denominated bonds to local investors yesterday, part of government efforts to develop new funding sources to reduce reliance on foreign debt and dampen the peso’s rapid rise.
Investor demand exceeded the issue size by more than three times, with total bids for dollar bonds on offer reaching $1.74 billion.
The onshore global bonds were sold at a coupon of 2.75 percent, the midpoint of Manila’s indicative price guidance of 2.5 percent to 3 percent.  
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The Philippines, one of the most prolific global bond issuers among emerging economies, wants to cut its dependence on foreign borrowing by pursuing debt buybacks, swaps and innovative deals such as local-currency denominated debt to better manage its debt load and win its first investment grade rating.
The government will study the local market’s ability to absorb dollar debt before issuing more global bonds onshore, National Treasurer Rosalia de Leon said.
The government wants to create more demand locally for dollars and help the central bank manage the rapid appreciation of the peso, Asia’s best performing currency this year with gains of around 7 percent.
The government has also said it plans to borrow more from the local market and cut its overseas debt sales in 2013 to a range of $1.5 billion to $2 billion from an original program of $3 billion.
The government will source more dollars from the central bank’s record foreign reserves next year to pay off its foreign debt and will study the local market’s ability to absorb dollar debt before issuing more global bonds onshore, de Leon said.
According to Jonathan Ravelas, chief market strategist at BDO Unibank, 10-year dollar bonds are currently trading at 2.2% yield.
Since the onshore dollar bond has a 10.5-year maturity, “the yield should be around 2.6 or thereabouts,” he said.
The notes, maturing June 2023, will be priced Nov. 28 and will be issued at par Dec.4.
Land Bank of the Philippines is lead arranger with First Metro Investment, Deutsche Bank, Credit Suisse and HSBC joint issue managers.
The government bought at least $750 million this year from the central bank’s reserves to repay part of a $1.5 billion debt buy-back program early this month.
The other half of the debt buy-back was financed via its $750 million 10-year global peso note issue, which attracted bids nearly 8 times the issue size at a yield lower than initial guidance.  
Last month, Moody’s Investors Service upgraded the country’s ratings to one notch below investment grade, matching those of rivals Standard & Poor’s and Fitch ratings.  (Dow Jones)