Taking advantage of the momentum in the credit markets and a strong retail bid, the Bangko Sentral ng Pilipinas (BSP) added another $150 million to its 9% November 2005 transaction yesterday (Monday). With JPMorgan as sole lead manager, the BB+/Ba1-rated credit priced the new line at 100.125% to yield 8.96% or 480bp over Treasuries.
"The key to the success of the overall deal is that the BSP has achieved risk free execution," one banker comments. "With the minimum of noise and fuss, it has created a liquid emerging market benchmark. Now that the transaction tops the $500 million mark, it also becomes eligible for the MB index."
Against the interpolated curve, the central bank is said to have priced the new deal at a 15bp premium compared to a 30bp premium when it originally tapped the market on October 24. This is based on an 8.18% yield for three-year sovereign paper and a 9.40% yield for five-year paper.
Pricing came flat to the secondary market bid of the outstanding deal. Virtually all of the paper was said to have been placed with private bank investors out of the Philippines, Hong Kong and Switzerland, with a couple of bank orders topping up the book.
"Investors were looking to replace a handful of Philippines deals that have hit maturity including two from the Ayala group," the banker continues. "Retail investors are also much more sensitive to coupon and price rather than spread. This means that although five-year Treasuries have been whipping around all over the place, the price of the original BSP deal has been very stable ever since it was launched. Any volatility in spreads and retail investors always move in to tighten levels back again."
Unlike the first $50 million re-opening on November 9, the new deal will not immediately be fungible with old, but will trade separately for the first 40 days. Pricing on October 24 came at par to yield 517bp over Treasuries, or 545bp over the interpolated curve.