Marcos admin raises $2B via dollar bond issue
The Philippine government has raised a total of $2 billion or around P117 billion by offering triple-tranche dollar-denominated bonds —marking the Marcos administration’s debut in the offshore debt market.
National Treasurer Rosalia de Leon on Thursday told GMA News Online that proceeds of the bond offering will be used for general government financing or for state programs and projects.
The Philippines offered five-year and 10.5-year global bonds; and a 25-year ESG or environmental, social, and governance bonds.
De Leon said the final pricing levels for the bonds are as follows:
- $500 million five-year at 5.17% / five-year UST (US Treasury spread) +120 basis points (bps)
- $750 million 10.5-year at 5.609% / 10-year UST +185 bps
- $750 million 25-year ESG at 6.10%
In a statement, the Department of Finance (DOF) said the transaction is expected to settle on October 13, 2022.
The global bonds are also expected to be rated Baa2 by Moody’s, BBB+ by Standard & Poor’s, and BBB by Fitch.
Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that tapping the international debt market is “one way to diversify the country’s funding sources, including overseas, as well as to constantly provide supply/liquidity of Philippine global bonds in the international market, for as long as the peso remains relatively stable as seen since last week, though the funding costs locally and globally for bonds have already increased since the start of the year.”
Finance Secretary Benjamin Diokno earlier said the Marcos administration is expected to borrow more than P1 trillion to plug the projected fiscal shortfall next year.
However, he has said that the debt levels seen during the Duterte administration will no longer be seen in the current regime.
The previous administration embarked on a borrowing spree to boost state coffers to respond to the COVID-19 pandemic—providing cash aid to vulnerable sectors and procuring vaccines to immunize the population, among others—as it implemented hard lockdowns to control the spread of the disease, causing economic activity to contract, which affected state revenue collection.
Diokno earlier said that the debt-to-GDP ratio would gradually decline to 61.8% this year, 61.3% by 2023, 60.6% by 2024, and 59.3% by 2025.
The debt level should drop to 52.5% by the time the Marcos presidency ends in 2028.
Before the pandemic, the country’s debt-to-GDP ratio hit a record low of 39.6%.
On the Marcos administration’s first international bond offering, Diokno said the strong demand for the offer “demonstrates investor confidence in the new government and the administration’s six-year plan of economic transformation to a more inclusive, resilient, and prosperous economy.”
“The eight-point agenda of the new administration will improve real GDP growth, improve government finances, protect purchasing power, mitigate socioeconomic scarring and create more quality jobs,” Diokno said.
De Leon, likewise, said, “The success of this transaction is an indication of the Philippines’ readiness to brave choppy waters in pursuit of excellent results.”
“Just as we were able to deftly capture a good execution window amid a daunting volatile market environment to attain our financing objectives at favorable cost, we too shall rise above the present difficulties through our eight-point economic blueprint toward differentiating ourselves as the prime destination of choice among quality-conscious investors,” the Treasurer said.
—AOL/RSJ, GMA News