RoP returns to euro bond market with an upsized offering

Strong investor demand marked RoP’s successful euro bond offering, buoyed by favourable indicators including a recent sovereign upgrade and burgeoning economic growth

The Republic of the Philippines (RoP) made its long-awaited return to the euro bond market after an absence of more than a decade when it priced on May 9 an upsized 750-million-euro (US$842.70 million) offering.

The Securities and Exchange Commission-registered eight-year deal was priced at 99.104% with a coupon of 0.875% to offer a yield of 0.992%. This represented a spread of 70bp over mid-swap – much tighter than the initial price guidance of between 90bp and 100bp due to strong investor demand, which reportedly amounted to almost 3 billion euros.

The deal comes just more than a week after S&P Global Ratings raised the sovereign rating from BBB to BBB+ with stable outlook on the back of a solid growth trajectory, a strong external position and sustainable public finances.

The rating agency says the Philippine economy is growing at a consistently faster pace than its peers and strong economic growth is expected to continue as long it is able to maintain its investment climate. It also projects an average GDP per capita growth of around 4.9% annually from 2019 to 2022.

Finance secretary Carlos Dominguez III echoes that the successful euro bond transaction is a testament to the international investor community’s vote of confidence in the country’s strong macroeconomic fundamentals and sustained high growth prospects despite global financial headwinds.

In executing the deal, the sovereign conducted a roadshow to meet fixed income investors in Zurich, London, Paris, Frankfurt and Milan, which commenced on April 26 – a few days before the rating upgrade announcement.

National treasurer Rosalia de Leon notes the sovereign garnered outstanding support from high-quality accounts with a large order book, allowing the RoP to increase the base offering from 500 million euros to 750 million euros. “The successful transaction allowed us to diversify our funding programme to support productive spending for infrastructure and social services,” she adds.

In terms of geographical distribution, 24% of the bonds were distributed in Germany, 15% in Italy, 10% in the UK, 26% in rest of Europe, 9% in the US, 6% in the Philippines, 5% in rest of Asia and 5% in other jurisdictions.

By type of investors, fund managers accounted for 59%, banks and corporates 24%, insurance companies, pension funds and official institutions 11%, and other investors 6%.

Proceeds from the latest offering will be used for general government purposes, including budgetary support. Deutsche Bank and UBS acted as the joint global coordinators for the transaction, as well as joint bookrunners and lead managers, along with BNP Paribas, Credit Suisse and Standard Chartered.

This year, the RoP accessed the US dollar bond market in January, which raised US$1.5 billion for 10 years. It is also slated to return to the Panda bond market following its inaugural issuance in March 2018 amounting to 1.46 billion yuan (US$214.40 million).

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Date

14 May 2019

Channel

Capital Markets

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