Philippines returns to international debt market with $500 million bonds

• Mar 22, 2022

MANILA, Philippines — The Philippines returned to the international debt market for the first time this year by offering global and green bonds to boost the government’s budget for pandemic recovery.

In a notice of issuance, the Philippines said it would borrow a benchmark amount or at least $500 million through the offering of global bonds with tenors of five years and 10.5 years, as well as sustainable bonds with a maturity of 25 years.

The Philippines expects the maiden offering of green bonds to fetch rates at an average of 4.7 percent. The country will settle all of the securities on March 29, according to the notice.

The notice also said that proceeds from the five-year and 10.5-year debt papers would be used to expand the general budget of the government. As for the 25-year green bonds, proceeds will be channeled to refinance assets in line with the sustainable finance framework.

The notice listed the Bank of China, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Mizuho Securities, Morgan Stanley, Standard Chartered Bank and UBS as joint lead managers and joint bookrunners for the issuance.

Last year, Finance Secretary Carlos Dominguez announced that the country would auction green bonds for the first time to fund the government’s sustainable projects.

However, the government had to wait for market conditions to steady before issuing $500 million in sustainable bonds. As expected, borrowing costs are increasing, pressured by the US Fed hikes and Ukraine-Russia war.

The country’s outstanding debt rose to a record high of P12.03 trillion as of January, and accounted for 60.5 percent of gross domestic product in 2021.

Meanwhile, New York-based Moody’s Investor Service assigned senior unsecured ratings of Baa2 to the dollar-denominated bonds that the Philippines will issue.

“According to the terms and conditions available to Moody’s, the bonds to be issued under the government’s existing shelf program filed with the Securities and Exchange Commission in the US will constitute direct, unconditional and unsubordinated obligations of the government of the Philippines,” Moody’s said.

It said the bonds will rank pari passu or on equal footing with all of the country’s existing and future senior unsecured external debt obligations. The rating also mirrors the credit rating of Baa2 held by the Philippines.

Source: https://www.philstar.com/business/2022/03/22/2168942/philippines-returns-international-debt-market-500-million-bonds