RP bonds raise $2.2b

RP bonds raise $2.2b

Manila Standard Today
Jan 6, 2006
http://www.manilastandardtoday.com/?page=business01_jan06_2006
By Lawrence Agcaoili

The Philippines successfully sold $2.2 billion worth of sovereign bonds Wednesday evening raising about 70 percent of its full-year foreign borrowing requirement during its first foray into the international bond market this year.

Finance Secretary Margarito Teves told reporters yesterday that the national government has already financed a significant portion of its expected $3.1 billion commercial external funding requirements for the year.

Teves said the Philippines returned to the international capital markets with simultaneous bond offering consisting of $1.5 billion worth of 25-year US dollar denominated bonds and 500 million Euros ($700 million) worth of 10-year bonds.

The Philippines may wait as much as nine months before tapping international markets again as it wants to get a stronger endorsement from credit rating agencies. The government plans to raise a total of $3.1 billion in overseas debt markets this year.

“We are very happy with the response of the investors to this international offering. This is a strong manifestation of the growing international investor confidence that is solidifying on the back of sound macroeconomic and fiscal management by the administration,” Teves said.

The Philippines sold the other day the 25-year dollar bonds to yield 7.875 percent and the 10-year euro bonds to yield 6.375 percent. The order book for the two issues topped $15 billion.

Teves said the international bond market is responding favorably to what has happened and what is happening in the Philippines in recent months.

Due to prudent spending, the national government likely ended 2005 with a budget deficit ranging from P160 billion to P165 billion. Last year, the government was hoping to trim the budget shortfall to P180 billion or 3.4 percent of gross domestic product (GDP) from P187 billion or 3.9 percent of GDP in 2004.

The peso has also appreciated strongly reaching its strongest level in 32 months while the yield of the benchmark 91-day treasury bills (T-bills) fell to its lowest level in 41 months.

He said the national government was hoping that international credit rating agencies led by Standard & Poor’s, Moody’s Investor Service and Fitch International would take note of the country’s fiscal discipline.

“We will continue to work on those macroeconomic fundamentals and what is necessary to continue increasing the level of confidence of our people and the investors in the Philippines. We are hoping of course that as we try to do this there will also be a formal improvement in the way the rating agencies will judge us,” he added.

The three major ratings agencies gave negative outlooks to the Philippines last year on concerns about the pace of fiscal reforms as President Gloria Macapagal Arroyo faced a political crisis over allegations of election cheating and corruption.

Moody’s Investors Service rates Philippine debt at four notches below investment grade, with Standard & Poor’s at three notches below and Fitch Ratings at two notches below.

Moody’s is expected to announce the results of its latest assessment of Philippine ratings in the first quarter. Review teams from Fitch and S&P are expected to arrive in the country in January and April, respectively.

Approximately 400 investors from Asia, Europe, and the United States gobbled up the dollar denominated tranche due January 2031 within 14 hours from the time that it was launched. It carried a coupon of 7.75 percent and was priced at 98.641 percent to yield 7.875 percent or an equivalent of 333.5 basis points over comparable US treasuries.