The Republic of the Philippines took its $750 million January 2017 bond up to the $1 billion mark yesterday (Tuesday) with a $250 million tap led by JPMorgan.
The deal was priced at 100.25% to yield 9.326% or 461bp over Treasuries. Fees were 15bp.
News of the deal saw the existing 9.375% bond puttable in 2012 drop one-and-a quarter points. investors will undoubtedly be hoping spreads spring back today after Arroyo is re-confirmed as President and makes a landmark speech opening her second term.
The bond's performance will also be dictated by the market's reaction to the FOMC meeting in the US later today. Since a 25bp hike has already been priced into the market, a number of analysts believe Asian bonds and particularly the high yield sector may rally once the uncertainty is finally removed.
Specialists say it made sense to re-open the 2017 bond because it is one of the few sovereign issues trading just above par and could still offer a sensible discount to investors. They also believe it was better to go to the market with a small tap rather than a new benchmark bond, which might have spooked the Philippines curve.
If strong demand for the deal feeds through to the secondary market, it may set up some positive momentum for the Ba2/BB rated Republic as it faces up to the $1 billion left in funding for the rest of the year.
Specialists report an order book that topped $400 million, with participation by about 48 investors. By geography the deal is said to have a split of 60% Asia, 30% US and 18% Europe. About 15% to 20% of the total went into the Philippines.
Proceeds from the deal are being on-lent to the National Power Corporation (Napocor). Analysts say that the Republic will probably need to raise at least $1 billion for the electricity utility to cover it for the rest of the year and if it decides to start pre-funding 2005, the figure could shoot well past $1.5 billion.
