Strong demand for PHL’s first durable samurai bond
The issuance of durable bonds in Japan for the first time in the Philippines has led to strong demand, led by Finance Secretary Carlos G. Dominguez III says it reflects growing investor confidence in the country’s commitment to mitigating climate change.
The Philippines on Tuesday raised 70.1 billion Japanese yen or P29 billion from a four-step durable bond offer. The bonds had five-year, seven-year, 10-year and 20-year terms.
It is the country’s first environmental, social and governance (ESG) bond in the Samurai bond market. Proceeds will be used to fund projects for sustainable development and mitigation of climate change.
Last month, the Philippines raised 1 billion in green sustainability bonds from the U.S. bond offer, which was part of a total of $ 2.25 billion triple-trench bonds.
“After a successful US dollar transaction, the Republic has again shown the appetite of investors for the financial instruments of the Philippines by successfully issuing the first ESG Samurai Bond despite the current market volatility. It is a testament to the international appreciation and confidence in the government’s commitment to climate change mitigation and adaptation initiatives and the deepening of its domestic sustainable financial markets, “Mr Dominguez said in a statement.
Through the new bond agreement, it brings the country’s total foreign trade debt to 2.8 billion. The target is to borrow ৭ 6 billion this year.
“This first issue of sustainable bonds in the Japanese market demonstrates the growing confidence of investors in the Philippines and their commitment to green and social enterprise, even in the face of complex market uncertainties. The transaction also marks the republic’s first long-term samurai offer, “Finance Under-Secretary Mark Dennis YC Joven said in a statement.
The Treasury said the five-year term of the samurai bond raised P21.48 billion with a coupon rate of 0.76%. This re-offer price is 60 basis points (bps) higher than the Tokyo Overnight Average (TONA) rate, the benchmark used for government securities in Japan.
The re-offer price is the rate at which a bank sells bonds purchased from a bond issuer to the public.
The seven-year bond generated P2.06 billion at a coupon rate of 0.95%. The re-offer price is 70 bps higher than the benchmark rate, while 10-year bonds have raised P2.93 billion at the coupon rate of 1.22%, the re-offer price is 85 bps higher than the benchmark rate.
Finally, 20-year bonds raised P2.48 billion at a coupon rate of 1.83%, 115 bps higher than the re-offer rate benchmark rate.
“In the midst of market volatility and growing geopolitical tensions, this groundbreaking samurai transaction has demonstrated its ability to extend the maturity to the long end of the curve and tighter price than the current secondary level of the republic,” said National Treasurer Rosalia V. De Leon says 6
The bonds are rated “Baa2” by Moody’s Investor Service, “BBB +” by the S&P Global Rating, and “A-” by the Japan Credit Rating Agency.
The deal is expected to be finalized on April 22.
The maturity dates of five-, seven-, 10- and 20-year bonds are April 22,2027; April 20, 2029; April 22, 2032; And April 22, 2042, respectively.
SMBC Nikko Securities, Inc. And Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. Served as chief manager of the bond agreement.
In January, the country established a sustainable financial framework, which details how green, social and sustainable bonds are raised and how they will be used for eligible green and social projects.
Eligible projects include access to essential services, affordable housing, food security, clean transportation, mitigation of climate change, and renewable energy.
Last year, the Philippines pledged to reduce greenhouse gas emissions by 75% by 2030.
The government plans to raise P2.2 trillion ($ 42 billion) this year to cover its budget deficit, about 75% of which will have to be raised from the domestic market, with the rest coming from abroad. – Tobias Jared Thomas
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