By Lawrence Agcaoili

INVESTORS gobbled up $1.5 billion worth of the Philippines? 10-year benchmark bonds, an issue that was six times oversubscribed after orders reached $6 billion, Finance officials said yesterday.

The Philippines, the first Asian country to tap the international capital market this year to finance its budget deficit, made the offer through a quick-to-market approach and completed the book-building process in one day, Finance Secretary Margarito Teves said.

The Philippines took advantage of lower borrowing costs in making the offer.

?We are hopeful that our success will bode well for other Philippine and Asian borrowers,? Teves said.

The Republic of the Philippines bonds were the first offered by an Asian country and the third in the world after Brazil and Colombia.

The bonds, due on June 17, 2019, were sold overnight at 99.158 cents on the dollar with a yield of 8.50 percent.

The bonds had a spread of 23 basis points over the secondary trading of comparable debt instruments, lower than the 40 basis points to 50 basis points paid by Brazil and Colombia.

Still, the Philippines has limited its foreign borrowings to $2.6 billion this year. The $1.5-billion issue aside, it aims to raise another $1.1 billion in loans from the World Bank, Asian Development Bank and Japan Bank for International Cooperation.

?The transaction fulfills the government?s expected external funding requirements for 2009 and represents an important success for the Philippines,? Teves said.

?The strong interest we received from domestic and global investors was key to the completion of the deal.?

National Treasurer Roberto Tan said Asian, American and European investors gobbled up the bonds, of which 41 percent were sold in Asia, 37 percent in the US and 22 percent in Europe.

Standard & Poor?s rates the Philippines? foreign-currency debt BB-, or three levels below investment grade. Moody?s rates it B1, four levels below investment grade, while Fitch Ratings rates it BB, two levels below.

The Philippine government relies heavily on foreign and domestic borrowings to finance the budget deficit and repay its debts.

It intends to borrow P509.9 billion this year, and of that amount about P386.5 billion or 76 percent will be raised here and P123.4 billion or 24 percent from abroad. It intends to use P125.1 billion of the total to finance the deficit and P384.8 billion to repay its debts.

The Philippines abandoned its commitment to balance the budget last year, postponing that exercise to 2010 to boost spending following the global economic crunch.

The government is now staring at a budget shortfall of P102 billion this year from P75 billion last year as a result of the global economic slowdown.

Still, Teves said last year?s deficit would likely be below the P75-billion ceiling after the government booked P21.3 billion from the sale of its remaining stake in refiner Petron Corp. and the P13 billion in royalties paid by the proponents of the Malampaya natural gas project in Palawan. With Bloomberg