Critics would testify that despite the deal being Reg S and listed, it is no more than a dressed-up syndicated loan that benefits the bookrunner the most because it will be league table eligible. Lead officials, on the other hand, say that pricing inside the bank market results from the excess liquidity in Asia evident from the success of every other international bond deal launched so far this year.
"The Asian book for all these deals has been huge and investors are actively looking for opportunities at the short end of the curve, where it's most steep," says one banker. "This deal will appeal to banks, asset managers, insurance companies and underlying that, private banking money."
Pricing has been set at 275bp over six month Libor, with fees totalling 3/8ths, equating to an all-in cost to the borrower of about 290bp. This is well inside the credit default market where three-year sovereign paper is being quoted above the 300bp mark. In the straight bond markets, the nearest comparables are a June 2002 transaction, trading at a Libor equivalent level of 272bp and a June 2004, trading at a Libor equivalent of about 375bp over.
The best benchmark, however, is the BSP's club loan, which closed last month heavily oversubscribed. Seeking to re-finance a $400 million transaction that had fallen due in February, the central bank attracted commitments of $740 million for a three-year deal, priced at 310bp all-in.
The excess $340 million, plus the money raised from the new deal will refinance a second $470 million deal which matures in April. Bankers say that this will mark the central bank's final transaction of the year.
Where the Department of Finance itself is concerned, bankers hope that it will soon start to take a more proactive approach with investors. As one puts it: "There have been no conference calls, nothing, since the new funding team was put in place. The GMA government is sitting on a lot of goodwill, which may fade unless something is done to address investor concerns.
"Obviously, the government wants to get its domestic house in order first and is preparing for elections next month. But investors want to know about the fiscal deficit, tax targets, the privatization program. They want a dialogue."
Since the overthrow of the Estrada government, sovereign spreads have tightened in about 60bp at the shorter end of the curve and up to 140bp at the longer end. In recent weeks, however, the trend has been more sideways than downwards.