The transaction will set a precedent for corporate bonds because it is the first time that floating rate notes will be issued in a non-commercial paper deal. An HSBC official told FinanceAsia that the issue would encompass both floating and fixed rate notes and that the bank was talking to investors about their preferences regarding maturity.
The deal will have both fixed rate and floating rate notes with maturities of three to five years, the official explains. Were also looking at structuring in a 10-year piece and are talking to insurance companies to see what they would like.
The official adds that demand for longer-dated paper suggests an attitude shift among domestic investors. The Philippines has traditionally been a floating rate market [for commercial paper issuance], but with no long-term paper, he comments. Were seeing that beginning to change with investors now bidding aggressively for fixed rate securities. Theyre now willing to take a position with interest rates.
In the midst of the recent political uncertainty, the debt market has unsurprisingly been quiet, but the official remains confident that the market will grow, especially since regulatory changes have made it more conducive for issuance. Its been a difficult time politically, and the market has also taken time to adjust to regulatory changes, he says. These have basically bought the Philippine market more in line with US securities, making them more tradeable, which should improve liquidity. This has been a big change.
Were trying to make a market for tradeable floating rate notes a reality, the official continues. The commercial paper market is tradeable in theory, but there has been no secondary market. For corporates, its difficult because we have to make do with the available infrastructure, but were encouraging more aggressive bidding among investors to create oversubscription on deals, creating interest and improving interest in the secondary market.With the mandate for the Globe Telecom deal, HSBC will have arranged deals for the two major telecommunications companies in the Philippines. The bank has also lead managed transactions for PLDT. In November 1999, it led a Ps1.5 billion corporate bond - the first corporate deal from the Philippines to offer fixed rate notes - and in June 2000, a Ps1.27 billion issue.