PNG government secures US$500 million sovereign bond

Picture: LOOP PNG

PORT MORESBY, 01 OCTOBER 2018 (POST COURIER) – Papua New Guinea has raised US$500 million in a 10-year inaugural sovereign bond issuance which concluded last Friday.

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

“The 10-year bond raised US$500 million at 8.375 per cent,” the Deputy Prime Minister announced.

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

“The bond was priced at 8.375 per cent, which was much better than expectations and is testament to the quality of the investor accounts.

“The result is also recognition of the investor support given to Papua New Guinea’s 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 PNG’s funding sources now and into the future.

“PNG has been talking about a sovereign bond for almost 20 years, and this completion of the bond issue is a reflection of the positive change taking place in our economy,” Mr Abel said.

“After the marketing roadshow we have received almost seven times that and were able to negotiate the price down from above 9 per cent. We have exercised volume and price discipline by not taking more of what was on offer and being patient to bring the interest rate down.

“The strong and positive reaction is vindication of PNG’s reform and growth agenda that was articulated during its global marketing for the bond across Asia, Europe, and the US.

“Furthermore, PNG has achieved a rare feat to be able to issue and 10 year bond at its firstissuance.”

Abel said the government worked hard to enable access to direct budget support from the World Bank and ADB at very concessional rates during the next three years.

“We are driving government revenues back up through our Medium Term Revenue Strategy,” he said.

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