Philippines achieves lowest coupon for 25-year bond

True to its usual style of being the first out the gates, the Republic of the Philippines on Thursday morning priced a $1.5 billion 25-year global, securing the lowest coupon it has achieved for a long-dated bond.

Priced at par and offering a coupon of 5%, the sovereign was able to lock in ultra competitive funding, especially in contrast to its European sovereign peers that are struggling to raise funds. The Philippines is rated Ba2/BB/BB+ by Moody’s/Standard & Poor’s/Fitch.

“If you look at where markets are at the moment, I’d say it’s pretty compelling pricing for a 25-year bond,” said one person familiar with the deal. “It was no mean feat given where markets are.”

Despite pricing at the tight end of the final 5% to 5.1% range, the bonds continued to trade up in secondary, opening at 100.75 on Thursday morning.

According to a Manila-based bond trader on Thursday morning, the bonds were trading within a range of 100.25 and 100.875. “The bonds are trading up despite the fact that the Philippines priced at the tight end of the range, which made the deal less attractive to me,” he said. “I guess investors still have a lot of cash. But a lot of the local accounts were inflating their orders as they knew it was a hot deal.”

This is not the first time the Philippines has issued a 25-year bond. Early last year it tapped the market with a 25-year peso global.

The closest comparable bonds were the October 2034s, which were trading at 4.9%. According to the person familiar with the deal, the bonds maturing in January 13, 2037 came with a new issue premium of about 3bp, which was small compared to other bonds issued this week. Mexico was said to have paid a new issue premium of about 25bp to 30bp, Brazil about 12bp and Citigroup about 40bp.

The deal gathered an order book of nearly $12.5 billion from more than 370 orders. US investors were allocated 35%, Asia (excluding the Philippines) took 25%, onshore Philippine accounts took 25% and European investors were allocated 15%. Fund managers were allocated 51%, banks 30%, insurers 8%, private banks 6% and others 5%.

Deutsche Bank and Standard Chartered were joint global coordinators. Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Standard Chartered and UBS were joint bookrunners.