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January 9, 2009

Manila issues $1.5bn in global bonds to boost growth

The Philippines raised $1.5 billion in 10-year dollar bonds in what was the first Asian offshore sovereign issue this year, reported Reuters.

The news agency quoted bankers as saying that Manila was fortunate to bag additional liquidity amid a global credit crunch.

The issue -- four times oversubscribed -- was Southeast Asian nation's single biggest global bond offer in more than three years and fetched a yield of 8.5 percent, at the lower end of indicative yields that extended to as high as 8.75 percent.

"The acceptance of the Philippine credit is quite positive in the international capital markets, that is a plus," said Joey Cuyegkeng, economist at ING Bank in Manila. "It gives you some sense that the Philippines is still on the radar screen of investors."

The bonds have a spread of almost 600 basis points over corresponding U.S. Treasuries -- above the Philippines' existing yield curves -- which meant the government offered fatter payouts to attract investors.

It was priced at 99.158 percent, with a coupon of 8.375 percent.

"It's expensive, but in a world where nobody wants to lend, the fact that you were able to get that cash is a good sign," said a fixed income trader at a foreign bank in Manila who asked not to be named due to company policy.

With the issue the Philippines has already fulfilled its overseas borrowing plans for this year, raising fresh money to partly fund a 1.41 trillion peso ($30 billion) budget this year that is aimed at protecting economic growth.

But while funding its 2009 budget is not anymore a major problem, political distractions that have kept Congress from passing the budget bill before 2008 ended may prevent the funds being put to timely use.

Moves by President Gloria Macapagal Arroyo's allies in Congress to change the constitution to keep her in power beyond 2010, and a series of corruption investigations, delayed passage of the government's 2009 spending plan last year. The legislation is still pending in Congress.

Manila sold its last global bond exactly year ago when it re-opened its 2032 bonds to raise $500 million.

That issue was priced to yield of 6.541 percent or 220.5 basis points above comparable US Treasury debt.

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