Government borrows $2.5 billion to fund budget

Louise Maureen Simeon – The Philippine Star
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August 30, 2024 | 12:00am

MANILA, Philippines —  The Philippines managed to secure $2.5 billion from the international debt market through a triple-tranche global bond issuance aimed at financing the country’s budgetary requirements.

The government raised $2 billion (P140.7 billion)  in this year’s second foray into offshore commercial borrowing through the issuance of the triple-tranche dollar and sustainability bonds.

The government also raised $500 million via its 5.5-year tranche with a 4.375 percent yield, while it borrowed $1.1 billion for its 10.5-year tenor with a coupon of 4.75 percent.

Its 25-year sustainability bond, on the other hand, fetched an average rate of 5.175 percent and raised another $900 million. This is the country’s sixth sustainability bond offering.

The Marcos administration last issued dollar bonds in May, raising $2 billion amid elevated global interest rates.

At the time, coupon rates were higher at 5.25 percent for the 10-year tenor and 5.6 percent for the 25-year offer.

The latest $2.5-billion issuance forms part of the target $5 billion to be raised for the entire year. The remaining $500 million in program borrowing is expected to be raised via Samurai bonds by the end of the year.

The Bureau of the Treasury said the government took advantage of moderating benchmark yields as softer inflation data and increasingly dovish signs from the US Federal Reserve fueled investor certainty of upcoming rate cuts.

National Treasurer Sharon Almanza said the latest transaction attracted robust demand and strong momentum that carried across markets, with interest from a diverse pool of high-quality global accounts.

“The exceptionally tight pricing across all offerings enables the government to conserve on interest payments, thereby allowing more fiscal space to flow into transformative investments,” Almanza said.

Finance Secretary Ralph Recto said this is also a vote of confidence in the country’s solid credit profile.

“This is a significant win for every Filipino as we are raising funds at very affordable costs to support programs and projects that will boost economic growth, create quality jobs, increase incomes and reduce poverty,” Recto said.

The government intends to use the proceeds from the sale of the 5.5 and 10.5-year global bonds for general purposes, including budgetary support.

On the other hand, the proceeds from the 25-year green bonds will also be used for general purposes and to finance or refinance assets under the country’s sustainable finance framework.

The latest global bonds secured a rating of Baa2 from Moody’s, BBB+ from S&P Global Ratings and BBB rating from Fitch.

The transactions are scheduled to be settled on Sept. 5.

HSBC, Standard Chartered Bank and UBS acted as joint sustainability structuring banks.

BNP Paribas, Citigroup, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Standard Chartered Bank and UBS were joint bookrunners for the issuance.

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