Government issues P200 B in long-term bonds

By Iris C. Gonzales (The Philippine Star) Updated December 15, 2010 

MANILA, Philippines - The Aquino administration has issued a total of P200 billion worth of 2020 and 2035 bonds in a domestic debt swap and sale completed last Friday, preliminary data from the Bureau of the Treasury (BTr) showed.

In a telephone interview, National Treasurer Roberto Tan said the government has capped at P200 billion the awards for the new bonds even on the back of strong demand from investors.

Finance Secretary Cesar Purisima said that of the P200 billion, the government issued P34 billion worth of 2020 bonds and P166 billion worth of 2035 bonds.

“This has created a very deep benchmark for 25 year bonds, the longest tenor on our yield curve,” Purisima said.

The Finance chief said that the savings from the transaction, based on net present value, is around P6 billion, evenly split between the 10-year and 25- year bonds.

As part of the offer, the government also sold P15 billion worth of new 2035 bonds, mainly to buy back some local debt. No new money, however, would go to the National Government after the domestic debt swap and sale of new bonds.

As early as Friday morning last week, the government had already been deluged by offers from investors. Last Friday, the government received offers of around P150 billion for its new 2035 bonds and around P50 billion for the 2020 bonds under the debt swap program.

For the new money component, the government received bids of more than P20 billion last Friday but sold only P15 billion.

The government had set the minimum coupon rate for the 2020 bonds at 5.875 and 8.125 percent for the 2035 bonds.

“There is a minimum price already which was fully subscribed,” Tan said. The settlement is on Dec. 16, according to the schedule set by the Bureau of the Treasury.

For this transaction, the government tapped BPI Capital Corp., First Metro Investment Corp., Hongkong and Shanghai Banking Corp. Ltd. and the Land Bank of the Philippines as joint managers and joint arrangers for the transaction.

Since stepping into office, the Aquino administration has been putting in place measures that would lengthen the government’s debt maturity profile.

This is the second debt exchange by the current administration. Last September, it issued $2.04 billion of new 2021 US dollar bonds and $950 million of reopened 2034 US dollar bonds or a total of $2.99 billion in a dollar debt swap. It also sold $200 million of new bonds due 2021.

Finance officials said these initiatives are meant to lengthen the government’s debt maturity profile. Treasury officials said that there would be similar activities in the future as part of the government’s debt management program.

The government is looking to finance a swelling budget deficit that is projected to hit P325 billion this year or 3.9 percent of total economic output. The government has so far incurred a budget deficit P270.3 billion as of end-October.