UPDATE 1-Manila's Petron raises $211 mln from notes issue

* Petron lifts issue size to 10 bln pesos on strong demand

* Notes priced at 200 bps above comparable govt securities

* To fund expansion of retail network, refinery (Adds quotes, background)

MANILA, May 29 (Reuters) - Top Philippine refiner Petron Corp (PCOR.PS) said on Friday it raised 10 billion pesos ($211 million) from the issue of five- and seven-year fixed-rate notes to fund its expansion.

Petron said the issue size was increased from the initial 3 billion pesos due to strong demand, prompting the company to ditch an earlier plan to also sell retail bonds. The initial issue was more than three times oversubscribed, it said.

The company said the five-year notes were priced at 8.139 percent and the seven-year maturity at 9.329 percent, about 200 basis points above comparable government securities.

Average best bid for the government's 5-year bond PH5YT=RR was at 6.1958 percent at the close of the secondary market on Friday while the seven-year debt PH7YT=RR was at 7.2917 percent.

"The strong and positive response to our notes issue reflects the trust and confidence of the investment community in the viability and profitability of Petron over the long term," Petron President Eric Recto said in a statement.

Proceeds from the notes issue will be used to expand Petron's retail network and construction of additional facilities at its 180,000-barrel per day refinery.

Petron Chairman and Chief Executive Ramon Ang said earlier this month that the company plans to spend as much as $1 billion in additional refinery units, including a second fluidised catalytic cracking (FCC) unit that will enable the full conversion of residual products into higher-value gasoline, LPG, diesel and propylene. [ID:nSP464594]

The company last year began operating its first FCC which converts 75 percent of every barrel of crude oil into "white" products.

Recto has said construction of the second FCC might not start until late 2010.

The first FCC along with a propylene recovery unit and a BTX facility cost a combined $300 million to build. They are part of Petron's efforts to diversify into the petrochemical business.

San Miguel Corp (SMC.PS) (SMCB.PS) has an exclusive option to buy a 50.1 percent stake in Petron from UK investment firm Ashmore Group (ASHM.L) as it moves into heavy industry from its core food and drinks business.

The notes issue was jointly arranged by BPI Capital Corp, ING Bank Manila branch, Development Bank of the Philippines and HSBC. ($1 = 47.35 pesos) (Reporting by Manolo Serapio Jr.; Editing by Muralikumar Anantharaman)