Philippines to sell bonds worth up to $750 million

The Philippines, struggling to plug a budget shortfall, said on Monday it will sell $500 million to $750 million of fresh debt by reopening existing 2015 and 2030 bonds. The will be the second time the Philippines has come to the international bond market this year and the issues come as the country looks set to approve a crucial sales tax reform that would help address its fiscal deficit. Pricing of the bonds is expected later on Monday during New York trading hours, the Department of Finance said in a statement. The Philippines, Asia's most-active sovereign debt issuer outside Japan, will price the 2015 reopenings at 101 to 101.375, and the 2030 reopenings at 97.5 to 97.875.
Philippine 8.875 percent dollar bonds due 2015 were quoted on Monday at 101.50/102.50. The 9.5 percent 2030 bonds were at 98.00/99.00.
Lloyd Ong, senior credit analyst at BNP Paribas, said the prices did not look too high but were not cheap either.
"In light of the current market conditions, it's fair but not entirely attractive. The market remains cautious, especially to high-beta names," he said.
Emerging debt markets were hit hard in March as higher US interest rates and the threat of more tightenings hurt higher-yielding debt.
"The Philippines should get the money given that the size is not huge," Ong said.
A market source said the reopenings had so far attracted $400 million of orders.
The government said earlier this year it planned to raise $3 billion overseas to bridge its 2005 fiscal gap and $1 billion for debt-laden National Power Corp this year.
Manila has so far raised $1.5 billion through selling a 25-year bond in January.
Deutsche Bank, HSBC and J.P. Morgan are the lead managers for the latest bond sale.
The Philippines, battling corruption and tax evasion as it tries to narrow a $3.5 billion budget deficit and cut its reliance on debt, wants to raise additional funds from a package of tax and revenue reforms.
A senior lawmaker said on Monday that a joint panel of Philippine lawmakers agreed on a reform that gives President Gloria Macapagal Arroyo the power to raise the value-added tax rate to 12 percent from 10 percent from next January.
The bill also raises corporate tax to 35 percent from 32 percent for three years, after which it will be cut to 30 percent.
The government, which spends a third of its budget to service debt, has previously forecast its fiscal deficit to reach 180 billion pesos or 3.4 percent of gross domestic product (GDP) this year.
Its fiscal shortfall in 2004 was 186.1 billion pesos, or 3.9 percent of GDP.