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PHL raises P24B via Samurai bonds

THE PHILIPPINES raised ¥55 billion (P24.2 billion) from a three-year, Japanese yen-denominated “Samurai” bond offering, the Bureau of the Treasury (BTr) said on Tuesday.

The note, which has a coupon set at 0.001%, is a discount bond, which the IFR financial news service described as “an unusual structure in the cross-border yen bond market.”

The Treasury said in a statement this was the Philippines’ first bond issuance in Japan to fetch a zero coupon rate.

Finance Secretary Carlos G. Dominguez III said the government returned to the samurai bond market “while rates are still relatively low.”

The Treasury upsized the volume of samurai bonds it sold to ¥55 billion from the initial plan of ¥30 billion, due to strong investor demand. The bonds were priced at 21 basis points (bps) above benchmark, or the tightest spread the government had so far in the market since 2018.

The proceeds of the fund-raising activity will be used for budgetary support and repayment of maturing government debt.

“The landmark transaction highlights the government’s capability to respond to challenging times with creative solutions to free up fiscal space to augment the National Government’s COVID-19 (coronavirus disease 2019) response,” National Treasurer Rosalia V. de Leon said in a statement.

Moody’s Investors Service assigned a senior unsecured rating of “Baa2,” while S&P Global Ratings gave a “BBB+” rating to the Japanese yen-denominated bond, similar to current sovereign rating given by the two agencies to the Philippines.

The bonds will be settled on April 13 and will mature on April 12, 2024.

“This bond offering brings to light the government’s relentless drive to generate sufficient resources to fund its COVID-19 response and other priority programs that are meant to return the country soon enough to the path of high and inclusive growth,” Mr. Dominguez said.

SMBC Nikko Securities, Inc. served as the sole lead manager and book runner for the deal.

Last year, the government shelved its plan to tap the Samurai bond market as it opted to take advantage of the strong liquidity in the domestic market.

The last time the BTr issued Japanese yen-denominated bonds was in August 2019, when it raised ¥92 billion across four tenors.

Moody’s said the Philippines has “stable access to funding at moderate costs” and could support its future fiscal consolidation plans after the pandemic, given its track record of prudent economic and fiscal management and robust banking system.

“Unless the Philippines faces a significant and prolonged drop in remittances and an acceleration in the fragmentation of regional supply chains, growth potential will continue to be boosted by favorable demographics and ongoing improvements in the investment climate,” it said.

The debt watcher said a rating upgrade is possible once the government has restored its fiscal and debt position that had been dragged by the ongoing pandemic, and the economy returns to pre-crisis growth rate.

Meanwhile, it said a downgrade is possible if its fiscal and debt metrics worsens further, existing policies that support economic and fiscal strength are reversed, and if the strength of institutions and the government weakens.

The Philippines, one of Asia’s most-active sovereign bond issuers, plans to raise as much as $5.5 billion from the commercial debt markets this year to plug a budget deficit that covers the government’s pandemic response measures, including vaccine orders and flagship infrastructure projects. — Beatrice M. Laforga with Reuters

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