By Angela McDaniels
Seattle, Sept. 13 - The Republic of the Philippines said investors submitted $1.2 billion of bonds for exchange during its $11.8 billion debt swap.
In total, the Philippines plans to issue roughly $1.2 billion of new global bonds, including $764 million of amortizing bonds and $435 million reopened bonds.
It will also sell $10 million of new amortizing bonds for cash.
The coupon for the amortizing bond is 7½% and the issue price is $1,011.56 per $1,000 principal amount, resulting in a yield to maturity of 7.3795%. This equals the sum of the clearing spread for the amortizing bonds - set at 200 basis points - plus the interpolated U.S. dollar swap rate to the average life of the amortizing bonds using a weighted average life of 17 years and was determined at 8 a.m. ET on Wednesday. The response to the offer for existing bonds is in table 2.
The issue price for the global bond add on is $1,033.41 per $1,000 principal amount, resulting in a yield to maturity of 7.4490%. This equals the sum of the clearing spread for the global bonds - set at 205 bps - plus the interpolated U.S. dollar swap rate to the average life of the global bonds wand was determined at 8 a.m. ET on Wednesday. The response is in table 3.
As announced on Sept. 6, the country offered to swap existing dollar-denominated debt with maturities ranging from 2007 to 2025 for longer-dated bonds in order to extend its debt maturity profile and as part of a broader program to manage its external liabilities.
The country said it would buy back global bonds due in 2007, 2008, 2010, 2013 through 2017 and 2019 in exchange for a new amortizing global bonds due 2024 via a modified Dutch auction.
Additionally, holders could exchange 9½% global bonds due 2024 and 10 5/8% global bonds due 2025 for a reopening of the 7¾% bonds global bonds due 2031 via a separate auction.
Holders were allowed to submit competitive or non-competitive bids.
Investors who owned at least $100,000 of a series of existing bonds were required to tender at least $100,000 of that series.
In exchange for each $1,000 principal amount of existing bonds, investors will receive $1,000 multiplied by the exchange ratio, which is included in the table below. That ratio was set as the price of the existing bond, plus accrued interest up to but excluding the settlement date, divided by the issue price for the new bonds.
In the exchange for the reopened global bonds, the new bond price also includes accrued interest from July 14 up to but excluding the settlement date.
The price for the existing bonds was fixed at 8 a.m. ET on Wednesday using the interpolated U.S. dollar swap rate for the average life of the bonds plus 149 basis points. The price for each bond can be found in table 1 below.
The spread over the reference yield for the existing bonds was based on the difference between the yield to maturity of the Philippines' 8% bonds due January 2016 and the interpolated U.S. dollar swap rate to the maturity of the bonds at 5 p.m. ET on Monday. The spread for the calculation was the reference spread plus a relative spread of:
• 7½%% bonds due 2007: relative spread of negative 97 bps, giving a combined spread of 52 bps;
• 8 7/8% bonds due 2008: relative spread of negative 87 bps, giving a combined spread of 62 bps;
• 8 3/8% global bonds due 2009: relative spread of negative 68 bps, giving a combined spread of 81 bps;
• 9 7/8% global bonds due 2010: relative spread of negative 41 bps, giving a combined spread of 108 bps;
• 9% global bonds due 2013: relative spread of negative 9 bps, giving a combined spread of 140 bps;
• 8¼% global bonds due 2014: relative spread of negative 6 bps, giving a combined spread of 143 bps;
• 8 7/8% global bonds due 2015: relative spread of negative 2 bps, giving a combined spread of 147 bps;
• 9¾% fixed rate bonds due 2016: relative spread of 12 bps, giving a combined spread of 161 bps;
• 9 3/8% global bonds due 2017: relative spread of 12 bps, giving a combined spread of 161 bps; and
• 9 7/8% bonds due 2014: relative spread of 46 bps, giving a combined spread of 172 bps.
• The relative spread was 46 bps for the 9½% global bonds due 2024 and 10 5/8% global bonds due 2025, giving a combined spread of 195 bps.
Amounts less than $100,000 will be paid in cash.
The Philippines will not pay accrued interest - the extra amount was incorporated into the exchange ratio.
The exchange began on Sept. 6 and expired at 5 p.m. ET on Tuesday. The settlement is scheduled for Sept. 25.
Goldman Sachs & Co. (866-390-1729 or call collect 212 357-0601 and JP Morgan Securities Inc (877-217-2484 or call collect 212-834-7306) are the deal managers for the transaction.
The Philippines said it applied to list the new bonds on the Luxembourg Stock Exchange and to trade the new bonds on the EuroMTF Market.
Table 1: Old bond prices and exchange ratios
Old bond Price Exchange ratio
7½% bonds due 2007 $1,014.42 1.005714
8 7/8% bonds due 2008 $1,043.05 1.070119
8 3/8% global bonds due 2009 $1,053.22 1.044169
9 7/8% global bonds due 2010 $1,111.53 1.101269
9% global bonds due 2013 $1,122.07 1.119133
8.25% global bonds due 2014 $1,089.96 1.093361
8 7/8% global bonds due 2015 $1,136.57 1.125529
8¾% fixed-rate bonds due 2016 $1,132.13 1.159556
8¾% fixed-rate bonds due 2016 $1,132.13 1.159556
9 3/8% global bonds due 2017 $1,179.78 1.183548
9 7/8% bonds due 2019 $1,229.98 1.234905
9½% dollar-denominated global bonds due 2024 $1,214.66 1.197017
10 5/8% global bonds due 2025 $1,329.55 1.270356
Table 2: Shorter-term old bonds to be exchanged for amortizing bonds
| Old bonds | New bonds to be issued | Bonds exchanged | Old bonds remaining |
|
| 7½% bonds due 2007 | $2 million | $2 million | $298 million
|
| 8 | 7/8% bonds due 2008 | $8 million | $9 million | $740 million
|
| 8 | 3/8% global bonds due 2009 | $14 million | $14 million | $936 million
|
| 9 | 7/8% global bonds due 2010 | $39 million | $42 million | $561 million
|
| 9% global bonds due 2013 | $52 million | $58 million | $948 million
|
| 8¼% global bonds due 2014 | $98 million | $108 million | $1.602 billion
|
| 8 | 7/8% global bonds due 2015 | $74 million | $83 million | $976 million
|
| 8¾% fixed-rate bonds due 2016 | $0 | $0 | $0
|
| 8¾% fixed-rate bonds due 2016 | $60 million | $70 million | $630 million
|
| 9 | 3/8% global bonds due 2017 | $178 million | $210 million | $822 million
|
| 9 | 7/8% bonds due 2019 | $138 million | $169 million | $962 million
|
|
|
| Table3 : Longer-term old bonds to be exchanged for reopened bonds
|
| Old bonds | New bonds to be issued | Bonds exchanged | Old bonds remaining |
|
| 9½% dollar-denominated global bonds due 2024
|
| $209 million | $251 million | $482 million
|
| 10 | 5/8% global bonds due 2025 | $145 million | $184 million | $1.855 billion
|
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