PNG raises over a billion Kina in sovereign bond

PNG has raised a total of US$500 million (K1.57 billion) in a ten-year inaugural sovereign bond issuance, which concluded on Friday September 28th.

Deputy Prime Minister and Treasurer, Charles Abel, announced this in Port Moresby on Friday following a marketing roadshow overseas.

Abel welcomed the successful outcome of the bond issue which will be used to retire high cost short term domestic debt, convert short term debt t longer term, bring in foreign exchange and fund expenditure per the 2018 budget.

The Deputy Prime Minister said the 10 year bond raised K1.57 billion at 8.375, oversubscribed by 600 per cent.

Abel said this outstanding result was assisted by very strong international investor interest for this first tome issuance, with hard offers in excess of US$3.3 billion from 129 international banks and funds from Asia, Europe, and the United States.

He said this is a reflection of the positive change-taking place in the economy.

“The bond was priced at 8.375% which was better than expectation and is testament to the quality of the investor accounts.

“The result is also recognition of the investor support given to Papua New Guineas credit story that has come from credible financial and economic management.

“The coupon of 8.375 per cent is competitively priced against other frontier market sovereign bonds and importantly diversifies PNGs funding sources now and into the future,” said the Deputy Prime Minister.

Abel said they exercised volume and price discipline by not taking more of what was on offer and being patient to bring the interest rate down.

He added the strong and positive reaction is a vindication of PNG’s reform and growth across Asia, Europe, and the US.

“We have worked hard to enable access to direct budget support from the World Bank and ADB at very concessional rates over the next three years.

“We are driving government revenues back up through the Medium Term Revenue Strategy. We are negotiating better terms on three major upcoming recourse projects.

“Our overall debt is low by World Standards at below 35 per cent, our fiscal deficits are trending downwards and foreign reserves stabilized.

“This oversubscription to our first ever sovereign bond is a huge endorsement by the international financial markets in our economic plan,” said Abel.

The Deputy Prom Minister says PNG has achieved a rare feat at its first issuance and tenure and price is better than market expectations and compares well to domestic 10-year debt at over 12 per cent.

Cedric Patjole