The Development Bank of the Philippines (DBP) returned to the international debt capital market for the first time in a decade this month with the refinancing of its 10-year bonds, the Department of Finance (DoF) reported on Wednesday.
In a statement, the department said the bonds were priced at tighter spreads over the United States Treasuries than when these were first offered to global investors in 2011.
The state-owned bank raised $300 million from those bonds that year, which will mature on March 25.
The “DBP’s offering [on] March 2 was the first US dollar-denominated bond sale by a Philippine issuer and the first US dollar senior public bond issuance from a Southeast Asian bank this year,” the DoF said.
In a report to Finance Secretary Carlos Dominguez 3rd, JP Morgan was quoted as saying in the statement that the bonds’ refinancing tightened the DBP’s spread over US Treasuries to T10+97.5 basis points (bps) from T10 + 225 bps in 2011.
The multinational investment bank was among the offering’s joint lead managers and bookrunners.
It also said the DBP and the Philippine government refinanced the bonds — which it described as “another big win” for them — “despite a volatile past week on the back of weaker equity markets and large US Treasury rate swings.”
The transaction saw strong demand from real money fund managers and achieved a 27.5-bp revision from the initial price guidance.
“While investors initially exhibited price sensitivity due to the volatility in rates, the transaction was eventually priced at T+97.5 bps to yield 2.421 percent, which represents a premium of approximately 32.5 bps over the implied fair value of the Philippine sovereign at the time of issuance,” JP Morgan explained.
The spread over the implied fair value of ROP (Republic of the Philippines) bonds was 95 bps in 2011.
JP Morgan said the DBP “was able to time the market and capitalize on the stronger market backdrop” to launch its global roadshow on March 1 and subsequently price a successful transaction the following day.
Last week, the offering secured a “BBB(EXP)” expected rating from Fitch Ratings.
“We expect a high probability of extraordinary state support for the DBP, if needed, due to its strategic policy role, full state ownership, systemic importance as the second-largest state-owned bank in the Philippines with around 5 percent share of system assets, and the state’s ability to provide support as indicated in the sovereign rating of ‘BBB’/Stable,” the credit rating agency said then.