Republic of the Philippines completes synthetic note issue

Entering its first derivative transaction with a financial institution, the government has completed a $220.4 million synthetic financing via HSBC.

Taking advantage of pricing differentials between its onshore and offshore credit curve, the Republic of the Philippines has been able to secure substantial cost savings over issuance in the straight dollar market.

The $116.81 million three year portion of the note was, for example, completed at 170bp over Libor, versus an outstanding trading spread of 325bp over Libor for the Bangko Sentral ng Pilipinas's BSP 2004 bond. The $103.59 million five-year portion was completed at 190bp over, compared to a 450bp trading level for the Republic's 2006 bond.  Respectively, these equate to a cost saving of 155bp on the three year and 295bp saving on the five year.

HSBC completed a...

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