Philippines Sells $1.5 Billion of 25-Year Debt to Fund Government Stimulus
The Philippines sold $1.5 billion of 25-year dollar-denominated bonds as the government boosts spending to support economic growth.
The 2037 notes were priced Jan. 4 in New York to yield 5 percent, according to data compiled by Bloomberg. That compares with an initial price guidance of 5.25 percent.
Brazil and Mexico have sold global bonds this year at record-low yields, even as European nations are struggling to contain a sovereign-debt crisis. Standard & Poor’s raised the outlook on the Philippines’ BB debt rating to positive last month, signaling a possible upgrade from the second-highest junk grade. Fitch Ratings lifted Indonesia to investment grade last month as it lowered France’s rating outlook and put Spain and Italy on review for a downgrade.
“It’s natural to kick off 2012 with the Philippines bond because it has a wide global audience,” said Scott Bennett, head of Asian credit at Aberdeen Asset Management, who oversees $1.5 billion of assets.
The Philippines may win a rating upgrade in six months to 12 months after the positive outlook from S&P, central bank Deputy Governor Diwa Guinigundo said.
“We are very pleased to have once again been able to extend the Republic’s maturity profile while at the same time achieving the lowest yield for a new 25-year benchmark U.S. dollar global offering by the Philippines,” Finance Secretary Cesar Purisima said in an e-mailed statement.
The bonds were sold to yield 196 basis points, or 1.96 percentage points, over benchmark U.S. Treasuries, according to the statement. Brazil sold $750 million of notes due 2021 on Jan. 3 to yield 3.45 percent, 150 basis points more than similar-maturity Treasuries. The 3.71 percent yield Mexico paid on $2 billion of 10-year bonds the same day was 175 basis points higher than the rate on U.S. debt.
The proceeds of the Philippine bond sale will help President Benigno Aquino boost spending on roads, ports and waterworks to spur economic growth as Europe’s debt crisis hurts exports.
The yield premium (JPEMSOSD) investors demand to hold developing nations’ dollar bonds rather than Treasuries was 368 basis points on Jan. 3, up from 241 a year earlier, according to an index compiled by JPMorgan Chase & Co.
The Philippines continues to favor longer-dated debt to extend maturities and better manage finances, Treasurer Roberto Tan said this week.
“Local demand alone for the Philippine bonds would be very substantial,” said Lito Mercado, head of trading at Rizal Commercial Banking Corp. in Manila.
The Philippines has sold global bonds every January for the last six years. Deutsche Bank AG and Standard Chartered Plc are global coordinators while Citigroup Inc., Credit Suisse Group AG, Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan, and UBS AG helped arrange the sale, the government said.
Indonesia has hired HSBC, JPMorgan and Standard Chartered Plc for a benchmark sale of dollar bonds in 2012, a person familiar with the matter said in November.
The Philippines is ready to start 141.8 billion pesos ($3.2 billion) worth of infrastructure projects this month, Budget Secretary Butch Abad said on Jan. 2. That’s equivalent to 78 percent of the 2012 budget for public works spending.
Growth of 3.2 percent in the third quarter held near the 3.1 percent pace in the previous three months that was the slowest since 2009. Government spending fell 7.3 percent in the first nine months of 2011. Exports dropped 15 percent in October, sliding for a sixth month, official figures show.
This year’s budget deficit may widen to 286 billion pesos from an estimated 150 billion pesos to 180 billion pesos in 2011 on public works spending, Abad said in an interview last month. The shortfall was 96.3 billion pesos in the first 11 months of last year.
The government plans to raise more than $2 billion from overseas bond sales in 2012 and about 75 percent of its debt sales will be domestic, it said in July. It has no overseas debt maturing this year, data compiled by Bloomberg show.
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