DBG offers $500-M bond float for RP aggie

The world's biggest bank, the Deutsche Bank Group (DBG), has offered to float and lead-manage a Euro 500 million ($500 million) bond in Europe to finance investments for the Philippine government's irrigation projects, the Department of Agriculture said.

In a series of meetings with DA officials, Deutsche Bank proposed a bond float of a minimum of Euro 500 million with a maturity of 10 years and a 182 to 207 basis-point spread over the LIBOR (London Inter-bank Offered Rate) for euro- denominated bonds. If the float pushes through, the proceeds equivalent to more than P29 billion will be used to finance irrigation projects of the Department of Agriculture.

The Deutsche Bank Group became the world's biggest bank after its recent merger with the Dresdner Bank. Its bond float offer could be a big boost to the Estrada administration's food security program, coming at a time that the national government is facing constraints in financing its priority programs.

"Due to our fiscal constraints, Secretary Edgardo Angara wants the DA to mobilize resources from the private sector, both locally and abroad, to finance urgent programs and projects of the DA, particularly irrigation," said Assistant Secretary Thereza Cruz-Capellan, who is leading the talks with Deutsche Bank.

Irrigation, a priority program of the DA under Angara's leadership, is key to increasing the country's agricultural output and in promoting national food security and poverty reduction. The country has a total irrigable land area of 5.7 million hectares, of which only 1.5 million hectares are currently irrigated. Capital expenditures on irrigation projects have been on the decline in real terms for the past decade, owing to a series of crises that afflicted the economy and constrained government expenditures.

"The (bank's) offer is the market's affirmation of the soundness of Secretary Angara's program priorities, which put a high premium on increasing our rice and corn yields," said Capellan. "It also signals the growing interest of the private sector to invest in agricultural infrastructure. They must have realized that such projects will ultimately lead to better economic prospects for everybody. More and better irrigation means better harvest and, ultimately, increased rural purchasing power," she added.