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APD | “BBB+” rating, successful bond floats show deeper investor confidence in the Philippines

Business2020-01-02

By APD writer Melo M. AcuñaMANILA, Jan. 2 (APD) – The successful acceptance of the country’s offshore bond issuances and the latest credit rating upgrade to the highest ever rate of ‘BBB+’ last year mark the investor confidence after reforms carried out by President Rodrigo Duterte to revitalize the economy and increase its benefits in all sectors including marginalized Filipinos.In a statement released today by the Department of Finance, it said Standard & Poor’s (S&P) announcement last April of its upgrade of the Philippines’ long-term credit rating from ‘BBB’ to ‘BBB+’, is just a step away from the “A” rating.This latest upgrade has placed the Philippines about Italy and Portugal and a step below Spain and Malaysia.  It placed the country at par with Mexico, Peru and Thailand.“These socioeconomic reforms being put in place by President Duterte are meant to sustain the growth momentum, attract investments, create jobs and spell a decent life for every Filipino,” Secretary Dominguez said in a statement.National Treasurer Rosalia De Leon said the upgrade is a recognition of our sound policies on liability management.“We have kept our debt in check, even as we invest more in infrastructure and social services.  We are committed to fiscal discipline, and this makes the Philippines a truly credit worthy sovereign in the eyes of the international financial community,” Ms. De Leon said.It will be recalled S&P attributed the improvement in the Philippines’ rating to its “above average economic growth, a healthy external position and sustainable public finance.”Secretary Dominguez added the ‘BBB+’ rating tells investors it is safe to do business in the Philippines and the country is highly capable of paying its debts.  “This enables the country to borrow at lower costs and spend the money it saves to bankroll its priority programs such as infrastructure, education, and health care,” he further said.He explained the private sector may borrow at lower rates to finance their business expansions as ordinary Filipinos will benefit because banks would lend money at lower interest rates.  Larger investments and more jobs for Filipino workers are expected with high credit ratings.The country continued to secure tight spreads as low as 32 basis points (bps) over benchmarks for its bond issuances relative to countries such as Indonesia, Mexico and Colombia across currencies.It obtained tight spreads for its inaugural renminbi (RMB)-denominated Panda bond float in 2018 and was received similarly during its return to the Samurai market that same year.  It will be recalled the Philippines’ 10-year Global Bond issue at 3.75 percent last January amounting to US$1.5 billion was priced 110 bps about its benchmark US treasuries, and tighter than an initial 130 bps guidance.Secretary Dominguez said the Philippines’ return to the European market after more than a decade with 8-year €750 million or US$839.4 million Global Bond float last May was priced at 70 bps above benchmark, said to be the lowest-ever € yield for a sovereign issuer outside European Economic Area.Meanwhile, the second issue of 3-year Panda bonds amounting to RMB 1.46 billion or US$203.35 million was priced at 32 bps last May while the multi-tranche Samurai bonds amounting to 92 billion yen (US$857.2 million) had a weighted average spread of 37 bps when it was issued last August.  (ASIA PACIFIC DAILY)

By APD writer Melo M. Acuña

MANILA, Jan. 2 (APD) – The successful acceptance of the country’s offshore bond issuances and the latest credit rating upgrade to the highest ever rate of ‘BBB+’ last year mark the investor confidence after reforms carried out by President Rodrigo Duterte to revitalize the economy and increase its benefits in all sectors including marginalized Filipinos.

In a statement released today by the Department of Finance, it said Standard & Poor’s (S&P) announcement last April of its upgrade of the Philippines’ long-term credit rating from ‘BBB’ to ‘BBB+’, is just a step away from the “A” rating.

This latest upgrade has placed the Philippines about Italy and Portugal and a step below Spain and Malaysia.  It placed the country at par with Mexico, Peru and Thailand.

“These socioeconomic reforms being put in place by President Duterte are meant to sustain the growth momentum, attract investments, create jobs and spell a decent life for every Filipino,” Secretary Dominguez said in a statement.

National Treasurer Rosalia De Leon said the upgrade is a recognition of our sound policies on liability management.

“We have kept our debt in check, even as we invest more in infrastructure and social services.  We are committed to fiscal discipline, and this makes the Philippines a truly credit worthy sovereign in the eyes of the international financial community,” Ms. De Leon said.

It will be recalled S&P attributed the improvement in the Philippines’ rating to its “above average economic growth, a healthy external position and sustainable public finance.”

Secretary Dominguez added the ‘BBB+’ rating tells investors it is safe to do business in the Philippines and the country is highly capable of paying its debts.  

“This enables the country to borrow at lower costs and spend the money it saves to bankroll its priority programs such as infrastructure, education, and health care,” he further said.

He explained the private sector may borrow at lower rates to finance their business expansions as ordinary Filipinos will benefit because banks would lend money at lower interest rates.  Larger investments and more jobs for Filipino workers are expected with high credit ratings.

The country continued to secure tight spreads as low as 32 basis points (bps) over benchmarks for its bond issuances relative to countries such as Indonesia, Mexico and Colombia across currencies.

It obtained tight spreads for its inaugural renminbi (RMB)-denominated Panda bond float in 2018 and was received similarly during its return to the Samurai market that same year.  It will be recalled the Philippines’ 10-year Global Bond issue at 3.75 percent last January amounting to US$1.5 billion was priced 110 bps about its benchmark US treasuries, and tighter than an initial 130 bps guidance.

Secretary Dominguez said the Philippines’ return to the European market after more than a decade with 8-year €750 million or US$839.4 million Global Bond float last May was priced at 70 bps above benchmark, said to be the lowest-ever € yield for a sovereign issuer outside European Economic Area.

Meanwhile, the second issue of 3-year Panda bonds amounting to RMB 1.46 billion or US$203.35 million was priced at 32 bps last May while the multi-tranche Samurai bonds amounting to 92 billion yen (US$857.2 million) had a weighted average spread of 37 bps when it was issued last August.  

(ASIA PACIFIC DAILY)

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