THE Philippines on Wednesday returned anew to the international market as it seeks to raise at least $500 million in 5-year, 10.5-year issues and 25-year sustainability bond, marking the second dollar-denominated offering of the country this year and the first for the administration of Ferdinand R. Marcos Jr.
The Philippines’s multi-tranche dollar-denominated bond offering was assigned a “senior unsecured” Baa2 ratings by international credit watcher Moody’s Investor Service also on Wednesday.
Moody’s explained that the latest dollar bonds issued by the Philippines will be ranked “pari passu” with the country’s “current current and future senior unsecured external debt obligations.”
Moody’s pointed out that the Baa2 issuer rating for the Philippines takes into consideration the country’s “high potential” growth and a “moderate” government burden as compared to peers.
The credit watcher added that the Philippines also pose “strong” external position “to meet forthcoming cross-border payment obligations and weather capital flow volatility.”
“Structural credit challenges include low per capita income and some constraints to the quality of institutions, which stand in contrast to strong policy effectiveness,” it said.
“The Philippines also has a heightened susceptibility to environmental risks given the high incidence of climate-related shocks,” it added.
The latest dollar bond offering is registered with the United States Securities and Exchange Commission.
Sought for comment regarding the bench-mark sized dollar-denominated bond issued by the Philippines, Finance Secretary Benjamin E. Diokno said “sometimes” a country “has to be opportunistic” while taking note that the country’s preferred mix of borrowing remains at 75 percent (domestic) and 25 percent (foreign) mix.
“75:25 that’s the preferred mix; but sometimes one has to be opportunistic,” Diokno told reporters last Wednesday.
Diokno earlier revealed that the government is keen on borrowing more from the domestic market to “minimize” the country’s “foreign-exchange risks resulting from ongoing global uncertainties.”
This year, the government is set to borrow a total of P2.21 trillion, of which 75 percent will be sourced locally while the remaining 25 percent will come from foreign sources.
The proceeds from the 5-year and 10.5-year bonds would be used for “general budget financing.” Ditto for the amount raised under the 25-year “green” bond aside from bankrolling or refinancing “assets in line with the country’s sustainable finance framework.”
The Philippines’s dollar bonds offer would settle this month and would have an initial price guidance of T+155 basis points (bps) area for the 5-year bondT+220 bps for the 10-year tenure, and 6.55 percent area for the 25-year sustainability or green bond. The joint bookrunners for the dollar bonds offering are BofA Securities, Goldman Sachs, HSBC (B&D), J.P. Morgan, Morgan Stanley, SMBC Nikko, Standard Chartered Bank and UBS.
In March, the Philippine government borrowed $2.25 billion from its very first dollar-denominated global bonds, including its maiden green bonds. (Related story: https://businessmirror.com.ph/2022/03/22/phl-raises-2-25b-from-new-global-bonds/)
Broken down, the government raised $500 million for its new 5-year global bonds and another $750 million for its 10.5-year global bonds. Meanwhile, its first-ever sustainability dollar global bonds yielded $1 billion in proceeds for the government’s climate change initiatives.