ADB Philippine Peso Bond Issue
Address By
Khempheng Pholsena
Vice-President, Finance and Administration
Asian Development Bank
28 October 2005
Diamond Hotel, Manila
Good afternoon Excellencies, Ladies and Gentlemen,
I would like to welcome you to the signing ceremony and press conference on the occasion of ADB's debut Philippine Peso bond issue.
We are pleased to inform you that today ADB priced its debut Philippine Peso bond issue - a 2.5 billion zero-coupon Peso issue which will mature in 2010.
ADB is proud to be able to participate in the development of the Philippine capital market. The Philippine Government has indeed been very successful in its capital market initiatives. ADB will be honoured if our bond issue can contribute to further development of the local market.
We would like to express our sincere appreciation to the Government of the Philippines to have created the enabling environment for this inaugural issue to take place. The substantial support from the Department of Finance, the Bangko Sentral ng Pilipinas, the Office of the National Treasurer, the Securities and Exchange Commission, as well as the Insurance Commission and the Bureau of Internal Revenue have been a crucial success factor for allowing ADB to launch this market-opening bond issue.
We closed the book on the zero-coupon bond issue at 3.00 pm today afternoon and priced the issue at 65.31%. This corresponds to an implied yield of 8.7%. The issue was priced at around 6 basis points over the tax-adjusted Government Treasury yield curve. Offered through a bookbuilding process, the issue was oversubscribed. The issue achieved broad distribution with institutional investors in the Philippines including banks, insurance companies, and trust funds.
This issue represents many firsts in the Philippine domestic bond market: the first issue by a foreign entity, the first supranational issue, and the first issue rated triple-A by Fitch, Moody's and S&P.
The bond issue underscores ADB's confidence in the Philippine capital market. This, together with the new standards created through this issue in respect of regulatory framework and documentation, may facilitate issuance by other non-resident borrowers in the country.
We also hope that the inaugural ADB bond issue will contribute to further raising the profile of the Philippines' capital markets in the international financial community. ADB has provided long-standing assistance to the development of the Philippine capital markets. We are very pleased that with this inaugural issue, ADB is able to become an active participant in the Philippine capital markets as well.
With this issue, ADB has achieved an important milestone in its strategy to contribute to the development of bond markets in its developing member countries. In particular, we hope that the issue will add to issuer and product diversity in the Philippine capital market.
This inaugural issue continues ADB's long-standing tradition of undertaking market-opening transactions in the regional bond markets. Going back all the way to our first Samurai bond issue in Japan in the early 1970s, ADB has undertaken a range of market-opening bond issues in countries such as Korea, Australia, and Taipei,China. Since early 2004 alone, ADB has completed 5 market-opening transactions including India, Malaysia, Thailand, PRC and now the Philippines.
The proceeds of the bond issue will be used for a Peso-denominated loan to Balikatan Housing Inc. (BHI), a special purpose vehicle jointly-owned by National Home Mortgage Finance Corporation (NHMFC) and Deutsche Bank. BHI was set up for the purchase and resolution of a portfolio of non-performing loans (NPLs) from NHMFC.
The project will have significant benefits for the Philippines such as:
- upporting the Philippine Government's initiatives in the area of financial sector and housing finance reforms;
- Directly strengthening the financial position of the Social Security System and Home Development Fund and providing much needed liquidity to the Philippine pension system;
- Playing a pioneering and catalytic role in the nascent asset market in the Philippines; and
- Enabling highly delinquent borrowers of NHMFC to restructure their obligations.
Going forward, we will be considering other local currency bond issues, particularly in those developing member countries where bond proceeds can either be swapped into one of ADB's operating currencies, or be retained to finance projects that require local currency.
The inaugural ADB Philippine bond issue is also fully in line with ADB's assistance and commitment to the ASEAN+3 Bond Market Initiative. ADB has been a keen supporter of this important regional initiative and we hope to be able to continue to support development of regional bond markets by issuing benchmark bonds in the regional markets.
In closing, let me once again express our sincere appreciation to the Government of the Philippines for its commitment to ensuring the success of this issue. I would also like to commend our lead managers, HSBC, who excelled in making this transaction possible.
Thank you very much for your attention.
Read the News Release.
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