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Philippines’ US$3 billion G3 bonds include sustainability
Tighter pricing, robust demand strong vote of confidence in country's credit profile
Chito Santiago 10 Jan 2023

The Republic of the Philippines (RoP) followed the Republic of Indonesia (RoI) as the second sovereign in Asia to access the G3 bond market when it priced on January 9 a three-tranche offering totalling US$3 billion, including a sustainability bond.

The SEC-registered issuance comprised a 5.5-year bond amounting to US$500 million, which was priced at 99.435% with a coupon of 4.625% to offer a yield of 4.743%. This represented a spread of 105 basis points (bp) over US treasuries, which was in line with the final price guidance and 50bp tighter than the initial price range in the 155bp area.

The second tranche was a 10.5-year bond amounting to US$1.25 billion, which was priced at 99.992% with a coupon of 5% and a re-offer yield of 5.001%. This was equivalent to a spread of 145bp over US treasuries, which was also in line with final price guidance and 50bp inside of the initial guidance in the 195bp area.

The third tranche was a 25-year sustainability bond amounting to US$1.25 billion, which was priced at par with a similar coupon and re-offer yield of 5.50%. This was likewise in line with the final price guidance and 45bp back of the initial range in the 5.95% area.

RoI became the first sovereign to access the G3 bond market in the region when it printed on January 4 a three-tranche offering to raise a total of US$3 billion.

The issuance, which garnered a combined order book of US$14.45 billion, consisted of a five-year bond amounting to US$1 billion, a 10-year bond amounting to US$1.25 billion and a 30-year bond amounting to US$750 million.

The latest sustainability bond was RoP’s fourth G3 ESG (environmental, social and governance)-related bond offering following three transactions in 2022 – the US$2 billion triple-tranche issuance in October, the 70.1-billion-yen (US$531.4 million) samurai bond in April and the US$2.25 billion triple-tranche bond in March 2022.

In executing the deal, RoP took advantage of the improved market sentiments with economic data showing signs of slowing inflation and alleviating concern over US Federal Reserve tightening. The opportunistic trade illustrates the sovereign’s ability to navigate a challenging global environment and respond efficiently to capture conducive market conditions. The offering attracted strong demand across all tranches from a diverse pool of high-quality investors, reflecting their confidence on RoP’s credit profile.

Finance secretary Benjamin Diokno says the robust demand for the first international bond offering in 2023 represents a strong vote of confidence by international investors. “It is a testament to the Republic’s sound economic fundamentals and the resilience of our economy in the face of volatile global financial markets,” he adds.

RoP intends to use the proceeds from the sale of the 5.5-year and 10.5-year bonds for general purposes, including budgetary support, while the proceeds from the 25-year sustainability bond will be applied to general purposes, including budgetary support and to finance or refinance assets under the country’s sustainable finance framework.

Standard Chartered and UBS acted as joint structuring banks for the deal, as well as joint bookrunners and lead managers along with BofA Securities, Deutsche Bank, Goldman Sachs, HSBC and Morgan Stanley.

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