Philippines sets spreads in exchange offer for 14 series of bonds

By Angela McDaniels

Tacoma, Wash., Sept. 27 - The Republic of the Philippines said it determined the indicative spreads of the bonds it will issue in an exchange offer that began on Sept. 20

As previously reported, the republic is offering new dollar-denominated global bonds due 2021 and reopened 6 3/8% global bonds due 2034.

The indicative spread is 155 basis points for the new bonds and 160 bps for the reopened bonds, according to an FWP filing with the Securities and Exchange Commission.

Holders who exchange bonds in group A can chose to receive either new bonds or reopened bonds, and holders who exchange bonds in group B will receive reopened bonds.

The following bonds are included in group A:

• $1,484,215,000 of 8 3/8% bonds due Feb. 15, 2011 with a fixed spread of 5 bps;

• $948,383,000 of 9% bonds due Feb. 15, 2013 with a fixed spread of 25 bps;

• $1,601,622,000 of 8¼% bonds due Jan. 15, 2014 with a fixed spread of 70 bps;

• $976,414,000 of 8 7/8% bonds due March 17, 2015 with a fixed spread of 70 bps;

• $1.3 billion of 8% bonds due Jan. 15, 2016 with a fixed spread of 70 bps;

• $629,703,000 of 8¾% bonds due Oct. 7, 2016 with a fixed spread of 73 bps; and

• $822,381,000 of 9 3/8% bonds due Jan. 18, 2017 with a fixed spread of 90 bps.

The bonds in group B are:

• $962,468,000 of 9 7/8% bonds due Jan. 15, 2019 with a relative spread of negative 165 bps;

• $1.5 billion of 8 3/8% bonds due June 17, 2019 with a relative spread of negative 155 bps;

• $774,204,000 of 7½% bonds due Sept. 25, 2024 with a relative spread of negative 93 bps;

• $480,406,000 of 9½% bonds due Oct. 21, 2024 with a relative spread of negative 73 bps;

• $1,854,744,000 of 10 5/8% bonds due March 16, 2025 with a relative spread of negative 58 bps;

• $2 billion of 9½% bonds due Feb. 2, 2030 with a relative spread of negative 18 bps; and

• $2,384,506,000 of 7¾% bonds due Jan. 14, 2031 with a relative spread of negative 16 bps.

Holders will receive a principal amount of new bonds equal to the old bond exchange value divided by the new global bond issue price.

The old bond exchange value will be a price per $1,000 principal amount that will result in a yield equal to the reference yield plus the old bond spread.

The reference yield will be four-month Libor for the 8 3/8% bonds in group A, the dollar swap rate for all other series in group A and the reopening yield of the reopened bonds for the group B bonds.

The old bond spreads are noted in the lists above.

Those exchanging bonds due 2030 and 2031 will receive a special cash payment of $207 and $167 per $1,000 principal amount, respectively, in addition to new bonds. For these bonds, an amount equal to the special payment will be subtracted from the old bond exchange value.

The new global bond issue price will be a price per $1,000 principal amount that will result in a yield equal to the reference yield for that bond plus the indicative spread, which as noted above is 155 bps for the new bonds and 160 bps for the reopened bonds.

The reference yield for the new bonds will be the mid-market U.S. dollar interest rate swap rates for the maturities occurring immediately before and immediately after Jan. 15, 2021.

The reference yield for the reopened bonds will be the yield to maturity corresponding to the bid-side price of the U.S. Treasury 4.375% bond due May 15, 2040.

The reference yields and the pricing of the offer are expected to be announced on Sept. 29.

The Philippines said that it will issue a maximum of $3 billion of new global bonds in the offers, adding that, if any, the minimum tally of new bonds due 2021 will stand at $500 million.

The offers will end at 5 p.m. ET on Sept. 28.

New, reopened bonds

The new dollar global bonds will mature on Jan. 15, 2021. They will not be callable.

Previously, the republic issued $1 billion of the 6 3/8% global bonds due 2034 on Oct. 23, 2009 in addition to $850 million of the bonds on Jan. 13, 2010.

The reopened securities have a final maturity date of Oct. 23, 2034.

New reopened bonds issued in the exchange will form a single series with those previously issued.

The offering of the new global bonds is conditioned on the approval from the Monetary Board of Bangko Sentral ng Pilipinas, the central bank of the Republic.

Citi, HSBC and UBS Investment Bank are the joint dealer managers for the global bonds.

The information agent is Bondholder Communications Group, LLC (attn: Ruth Perez at rperez@bondcom.com; 212 809-2663 or 44 20 7382 4580).

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