MANILA, Philippines (UDPATE) - The Philippines completed a record P323.5 billion ($7.5 billion) local debt swap on Friday, and the government wants the new 2022 and 2031 bonds to be benchmarks for long-term financing, particularly for infrastructure projects.
The Southeast Asian country wants the private sector to help finance the rehabilitation and upgrade of major road, airport and rail networks in the country, which it expects would jumpstart more investments to underpin faster economic growth.
It has been working to lengthen the average maturity of its outstanding bonds to make debt management easier, taking advantage of strong investor interest to also lower its borrowing costs.
Manila said it would issue P67.6 billion of new January 2022 bonds and nearly P256 billion of July 2031 bonds in exchange for P292.5 billion of eligible shorter-dated bonds tendered by investors.
The debt exchange extended the average maturity of the local bonds swapped to 18 years from about 5.5 years. It was nearly P140 billion larger than the previous record swap last December.
The difference between the amount of the eligible bonds and the debt swap volume reflects payment of accrued interest on the shorter-dated paper and bond pricing deviation.
The coupon for the 2022 bonds was set at 6.375%, and 8% for the 2031 bond, both the minimum coupon previously announced. Settlement is on July 19.
"The success of this bond exchange will further strengthen the fiscal position of the Republic," Finance Secretary Cesar Purisima said in a statement. "It also reaffirms the growing investor confidence in the country's long-term prospects."
The Philippines has been innovative in managing its debt and weaning itself off costly foreign borrowing.
Last September, it was the first in Asia to offer global bonds denominated in the local currency, and made a second issue in early 2011. It also held swaps for foreign and local debt in the second half of 2010.
Purisima has said Manila was open to more bond swaps to cut interest costs and spread out its debt maturities.
BPI Capital Corp., SB Capital Investment Corp., Citibank, First Metro Investments Corp., and state lenders Development Bank of the Philippines and Land Bank of the Philippines are joint deal managers for the latest swap offer.