goodnewspilipinas.com - September 12, 2010

<< back to news

Peso bond sale a major int'l success nets $1 billion

A new milestone for the Philippine peso, as the country raised $1 billion, or P44.1 billion, from the sale of securities, pulling off the sale of the first peso-denominated bond outside the country.

It was also the first time an Asian country conducted a float using its own currency.

Usually, the government borrows from foreign commercial lenders in terms of US dollars, euros and yen.

The offering shows that, this time, the Philippine peso is now being accepted as an overseas bond, Finance Secretary Cesar V. Purisima said.

"Now, we can lessen the issuance of dollar bonds in the future," he said.

Purisima described Friday's transaction as "a resounding success and a breakthrough achievement" of the Aquino administration.

"This is a landslide vote of confidence by the global financial markets in (President Benigno Aquino's) leadership … as well as in the macroeconomic fundamentals of the country," Purisima was quoted as saying.

"We issued $1 billion worth [of bonds] in pesos, and the demand was for $13.3 billion."

13x oversubscribed

He meant that the bond offer was 13 times oversubscribed.

News of the peso bond offer, as well as developments at the Philippine Stock Exchange, perked up Mr. Aquino, who appeared to be smarting still from the recent hostage tragedy at Quirino Grandstand.

"How can you not be elated by so many good news," Mr. Aquino said, referring in part to the recent record high close at the stock market.

He said developments on the economic front would serve the country well, as it would veer international attention away from the negative perception generated during the hostage crisis, where eight Hong Kong tourists lost their lives in August.

Confidence

"The expectation primarily [is] that things are going to get better and that, perhaps, is a measure of the [people's] trust and confidence … in our current administration," Mr. Aquino told reporters after viewing military exercises at Sangley Point in Cavite.

Orders for the 10-year peso-denominated global bonds came from the United States, Europe and Asia, the finance department said.

Budget deficit

The Philippine bonds were also registered with the United States Securities and Exchange Commission, denominated in pesos but will be settled outside the country in US dollars.

Proceeds from the maiden issue of the peso global bonds will be used to curb the government's budget deficit and fund infrastructure projects.

The global bonds will mature in January 2021. The securities were priced at 99.607 percent of face value and was given a coupon of 4.95 percent.

If buyers were to hold on to the peso global bonds until maturity, they would earn 5 percent a year.

Currency fluctuation

Purisima said the cost of the borrowing was about a quarter less than what was expected.

The issuance "is the latest development in the [country's] financing program in support of the government's proactive management of external liabilities, particularly with respect to reducing its vulnerability to foreign currency risks," he said.

The finance chief explained that the government wanted to lessen the adverse effects of currency exchange fluctuations to the country's outstanding debt by issuing more debt paper in pesos rather than in dollars.

National Treasurer Roberto B. Tan said the peso global bond would enhance the government's debt investor profile while paving the way for greater participation by offshore investors in Philippine capital markets.

Tan said the transaction, or book-building, took about 16 hours, with 37.1 percent of the bonds going to buyers in Asia, 32.6 percent to those in the United States and 30.3 percent to those in Europe.

Citi group and Deutsche Bank acted as joint global coordinators for the transaction. The two banks also worked with Credit Suisse, Goldman Sachs (Asia), HSBC and JP Morgan as joint bookrunners.

Fitch Ratings assigned a "BB" rating to the Republic of the Philippines' benchmark peso-denominated global bonds.

The rating is in line with the Philippine sovereign's long-term foreign currency Issue Issuer Default Rating (IDR), which stands at BB+. The rating outlooks are stable.