Philippines returns to international debt market with $500 million in bonds

MANILA, Philippines — The Philippines has 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 an issuance notice, the Philippines said it would borrow a benchmark amount of at least $500 million through the five-year, 10.5-year global bond offering. years, as well as durable bonds with a duration of 25 years.

The Philippines expects the first green bond issue to yield average rates of 4.7%. The country will settle all securities on March 29, according to the notice.

The notice also stated that the proceeds from the five-year and 10.5-year debt securities would be used to augment the government’s general budget. As for the 25-year green bonds, the proceeds will be channeled to refinance assets in accordance with the sustainable financing framework.

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

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

However, the government had to wait for market conditions to stabilize before issuing $500 million in sustainability bonds. As expected, borrowing costs are rising, under pressure from US Fed hikes and the war between Ukraine and Russia.

The country’s outstanding debt hit a record high of 12.03 trillion pesos in January and accounted for 60.5% of gross domestic product in 2021.

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

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

He said the bonds will rank pari passu or on an equal footing with all existing and future unsecured external debt obligations of the country. The rating also reflects the Baa2 credit rating held by the Philippines.

Tana T. Thorsen