MANILA, January 28, 2005 (STAR) By Des Ferriols  -  International investors gobbled up the Philippines’ latest global bond offering despite concerns over the country’s fiscal position and ratings.

Finance officials reported yesterday the government raised $1.5 billion from the global bond offer instead of the original target of $1 billion.

It was the government’s largest single issue of bonds at a time when it is trying to boost revenues to fund the day-to-day running of the country.

"Through this transaction, the Republic has capitalized on market conditions and succeeded in raising a notable portion of our 2005 funding requirements with long-dated financing," Finance Undersecretary Eric Recto said yesterday.

The government decided to launch the 25 -year bonds ahead of the Lunar New Year holidays, when some fund managers were expected to be away, and before an expected US interest rate hike early next month, sources said.

The global bonds due February 2030 carry an interest rate of 9.50 percent and were sold slightly below par to give investors an actual return of 9.70 percent.

"This represents a spread of approximately 505 basis points over 30-year US Treasury bond (yields)," the finance department said.

Recto said the transaction was the largest single issue of bonds by the republic and the maturity was the longest permitted under Philippine laws.

Citigroup, Deutsche Bank and UBS were the joint-bookrunners for the transaction.

ING Financial Markets said that there was strong demand for Philippine dollar bonds.

"We continue to view (the issue of ) improving public finances as the main source of upward pressure on (bonds) and other financial asset prices," it said.

The Philippines plans to raise $4 billion in foreign borrowings in 2005.

The proceeds of the bond offer are expected to be used to help bankroll the Arroyo administration’s 2005 budget, part of which would be for the refinancing of maturing obligations for this year.

Finance officials had announced that the Arroyo administration planned to borrow in large tranches this year instead of small amounts and going back to the credit market often.

Out of its $4-billion foreign borrowing requirement, the Arroyo administration is planning to raise $3 billion from commercial loans and $1.5 billion was being planned for the first semester of 2005.

Reported by: Sol Jose Vanzi

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