Sovereign bond

Investment bankers Citigroup and Credit Suisse were joint lead managers and book runners for the deal, which garnered significant interest with some reports stating demand was USD3.3 billion, mostly from the USA. Nasdaq reported that the bond has a 10 year maturity and will carry a yield of 8.375 percent.

“The massive under-pricing of the sovereign bond is like selling off more of PNG’s resources too cheaply,” said Ian Ling-Stuckey, PNG’s Shadow Minister for Treasury and Finance.

It says this is a very good outcome for PNG in the beginning to diversify sources of its debt.

The Bank also said it marks an important milestone for the government, the central bank and Treasury with respect to debt management strategy.

Kina Bank believes PNG remains relatively attractive from an offshore debt provider point of view due to low foreign debt levels and a large trade surplus.

The bank said the issuance had been subscribed with a level of demand well in excess of the amount offered, indicating an underlying appetite for PNG foreign currency debt.

Mark Baker, Managing Director ANZ PNG said: “This marks an important milestone in the history of local financial markets, setting a strong precedent for future issuances in Papua New Guinea.”

It is an important phase in the evolution of an emerging economy and will go a long way in establishing PNG’s identity in global financial markets.

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.

The Shadow Minister for Treasury and Finance, Ian Ling-Stuckey, said the Treasurer is not admitting that a sovereign bond is now the wrong path for fixing the foreign exchange crisis crippling PNG’s economic growth.

Ling-Stuckey was responding to the Deputy PM and Treasurer, Charles Abel’s trip after leading the international roadshow to market PNG’s first ever sovereign bond.

The DPM and delegation covered Singapore, Hong Kong, London, New York, Boston and Los Angeles in 10 days.

In a packed schedule arranged by global lead coordinator Credit Suisse and joint bookrunners Citibank, the delegation presented to around 100 global banks and fund managers at 7 meetings per city.

“Our international partners have done a fantastic job in arranging meeting and providing advice. The interest has been really good with full meetings, including all the major players,” said Abel in a statement.

Institute of National Affairs executive director, Paul Barker said: “This is an exercise to reduce hard dependence on the local market; the government have been sustainably funding the budget gap for the last 18 months so, by borrowing heavily from the domestic market, from the bank, other institutions, treasury bills and other mechanisms.  

“The capacity and readiness of the domestic market to provide the level of funding is limited.

Institute of National Affairs executive director, Paul Barker made the comment when responding to question of the delay in releasing the International Monetary Fund (IMF) Report Article IV will hamper the Government’s bid for a sovereign bond.  

The PNG Government will make a trip to the United States for a road show this year, because the sovereign bond, when secured will support the 2017 National Budget.    

The Department of Treasury says it is waiting for BPNG to confirm dates and could not comment any further.

The Government is seeking a sovereign bond in foreign capital markets in the order of $US1 billion.

The State will use its shares in the resource projects and some percentage of its share in the LNG venture to secure bonds.  

In a recent interview with LOOP News, Secretary of Treasury Dairi Vele said the Government will need to secure funds to execute the 2016 Budget allocations.