After the successful conclusion of its P30 billion retail bonds issue in the domestic capital market, the Power Sector Assets and Liabilities Management Corporation (PSALM) is now preparing for a bigger batch of borrowings that may range from $1.0 billion to $1.5 billion of dollar-denominated bonds.

Acting Energy Secretary and PSALM vice chairman Jose C. Ibazeta indicated that the company’s planned dollar bonds will be pursued to complete its liability management requirement and working capital needs for this year until 2011.

PSALM reported that after completing roadshows in Manila, Cebu and Davao, it finally completed the P30 billion worth of five- and seven-year retail bonds; which shall partly cover debt payments falling due in the coming months.

“The timing of this issuance was perfect as PSALM took advantage of the deep liquidity in the domestic financial system,” Ibazeta said; adding that this somehow shows investor confidence in the company and the power sector in general.

The company added that the issues were priced at yields of 6.875% for the five-year tranche and 7.750% for the seven-year tranche. The total amount for the five-year peso bonds have been P11.32 billion, while the seven-year peso bonds are P18.68 billion.

The issues were 36 basis points and 43 basis points above the five- and seven-year benchmarks, respectively. Basis points would refer to the yield on bonds, with each percentage point equaling to 100 basis points.

It was noted that the bond issuance became particularly attractive because of the “full, irrevocable, and unconditional guarantee of the Republic of the Philippines” extended through the Department of Finance.

The company stressed that while this is the first time it tapped the domestic capital markets, there have been “strong demand from domestic investors:” hence, the issue turned out to be 1.7 times oversubscribed at the auction.

“The bonds were offered to government securities eligible dealers through a Dutch auction,” PSALM said, explaining that this had been based on a descending price auction, which an issuer exercises  to find an optimal market price for the bonds.

It was noted that total tenders during the auction reached P33.71 billion. Demand for the five-year paper reached P19.08 billion while for the seven-year paper, it hit P14.64 billion. The issue was jointly managed by the Development Bank of the Philippines, the First Metro Investment Corporation, and The Hongkong and Shanghai Banking Corporation Limited.