Strong demand for PHL’s first Samurai sustainable bond

REUTERS

The PHILIPPINES’ first sustainable bond issue in Japan was met with strong demand, reflecting growing investor confidence in the country’s commitment to climate protection, according to Treasury Secretary Carlos G. Dominguez III.

The Philippines on Tuesday raised 70.1 billion Japanese yen, or 29 billion pesetas, from a four-tranche sustainability bond offering. The bonds had maturities of five, seven, ten and 20 years.

This is the country’s first ESG (environmental, social, governance) bond in the samurai bond market. The proceeds are used to finance projects for sustainable development and climate protection.

Last month, the Philippines raised $1 billion in green sustainability bonds from a U.S. bond offering that was part of a triple-tranche bond issue totaling $2.25 billion.

“Following a successful US dollar transaction, the Republic has once again shown investor interest in Philippine financial instruments with the successful issuance of the state’s first-ever ESG Samurai bonds despite the current market volatilities. This is a testament to international recognition and confidence in the government’s strong commitment to mitigation and adaptation initiatives and to deepening its domestic sustainable finance market,” Mr. Dominguez said in a statement.

With the new bond deal, this brings the country’s total foreign commercial lending to $2.8 billion. The goal is to borrow $7 billion this year.

“This debut issue of sustainability bonds in the Japanese market demonstrates investors’ ever-growing confidence in the Philippines and their commitment to advancing green and social initiatives, even amid heightened market uncertainty. The transaction also marks the Republic’s first long-term samurai bid,” Treasury Secretary Mark Dennis YC Joven said in the same statement.

The Treasury said the five-year term of the Samurai bonds yielded 21.48 billion pesos with a coupon of 0.76%. This reoffer price is 60 basis points (bps) above the Tokyo Overnight Average (TONA) rate, the benchmark used for government bonds in Japan.

The re-offer price is the rate at which a bank will sell the public a bond that it has purchased from a bond issuer.

The seven-year bond yielded P2.06 billion at a coupon of 0.95%. The reoffer price is 70 basis points above the benchmark rate, while the 10-year bonds raised P2.93 billion at a coupon of 1.22%, the reoffer price is 85 basis points above the benchmark rate.

Eventually, the 20-year yielded P2.48 billion at a coupon rate of 1.83%, with the reoffer rate being 115 basis points above the reference rate.

“Amid market volatility and rising geopolitical tensions, this landmark samurai transaction has demonstrated the Republic’s ability to price lower than current secondary levels and extend maturity to the long end of the curve,” said National Treasurer Rosalia V. de Leon .

The bonds are rated Baa2 by Moody’s Investor’s Service, BBB+ by S&P Global Ratings and A- by the Japan Credit Rating Agency.

The deal is expected to close on April 22nd.

Maturities for the five, seven, 10 and 20 year notes are April 22, 2027; Apr 20, 2029; Apr 22, 2032; and April 22, 2042.

SMBC Nikko Securities, Inc. and Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. acted as lead bookers for the bond transaction.

In January, the country launched a Sustainable Finance Framework, detailing how green, social and sustainable bonds will be included and how they will be used for eligible green and social projects.

Eligible projects include access to basic services, affordable housing, food security, clean transport, climate protection and renewable energy.

Last year, the Philippines pledged to reduce greenhouse gas emissions by 75% by 2030.

The government intends to raise 2.2 trillion pesos ($42 billion) this year to cover its budget deficit, about 75% of which is expected to come from domestic sources while the rest will come from abroad. — Tobias Jared Tomas

https://www.bworldonline.com/top-stories/2022/04/13/442380/strong-demand-for-phls-first-sustainability-samurai-bond/ Strong demand for PHL’s first Samurai sustainable bond

Gary B. Graves

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