Philippines re-launches dollar bond

The Republic will re-launch only the Philippines seems capable of producing.

Lead managers HSBC, Salomon Smith Barney and UBS Warburg will begin a new accelerated bookbuild of a 10-year global today (Monday) after the deal failed to price on schedule at New York's open on Friday. The delay largely stems from confusing reports that the country's Finance Secretary Jose Camacho was resigning, which were then relayed across news wires and stopped the deal in its tracks.

As Camacho himself later explained to investors over a late night conference call, he had tendered his resignation two days earlier, but this was a purely "courtesy" measure in line with the rest of cabinet, who had all either handed verbal or written resignations to Executive Secretary Alberto Romulo.

And as one observer explains, "For the last few weeks there have been a lot of rumours that Arroyo intends re-shuffle the cabinet and in the Philippines it's customary for a minister to resign ahead of being sacked. Camacho's resignation was thrown straight into the wastebin, but while he was at a speaking engagement on Friday, a reporter asked him whether he had tendered his resignation and he said yes. Unfortunately, the reporter neglected to mention that it had been rejected and this caused all kind of headline confusion in the market."

But even before this incident, the deal had been facing a challenging time from investors and indicative pricing had already been pushed out once to take into account a back-up in Treasury yields overnight in the US on Thursday. The release of October's retail sales figures in the US indicated that the domestic economy may not be slowing as quickly as feared and led Treasury yields to rise 14bp to 20bp. The leads consequently decided to absorb some of the pain by widening indicative pricing on the deal from 9% to 9.125%.

At Friday's open in Asia, the most relevant benchmark - the Philippines 2017 bond put 2012 was trading at a bid yield of 8.87%, equating to a spread of 500bp over Treasuries (based on an interpolated curve). By contrast, the new deal will mature in February 2013 and has a long first coupon.

Throughout Friday, there was dissension among market players whether the differential between the two was enough. Some investors, for example, were said to be pushing for a yield of 9.375% on the basis that greater value should be accorded to the put option embedded in the 2017 deal.

Others however, say that by the end of Asia's trading day the book was already covered and barring further political "colour" should prove relatively straightforward to re-build on Monday.

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