BSP eyes additional $130-M loan to settle maturing obligations

After successfully acquiring a $740-million syndicated loan from 19 local and foreign lenders, the Bangko Sentral ng Pilipinas (BSP) is planning to get another loan possibly toward the latter part of the year to settle its maturing debts.

BSP Governor Rafael Buenaventura said the BSP had hoped to make the $740-million loan its last for the year, but added the loans might not be enough to settle a total of $870 million maturing loans for this year.

Thus, an additional loan of $130 million could be in the offing sometime in the latter part of the second semester, Buenaventura said.

The BSP chief said the additional loan will be acquired either through a private placement, or other better options.

"We are also waiting for better pricing," Buenaventura added.

The signing of the $740 million on March 15, the first sovereign deal under the Arroyo administration is $340 million more than the targeted loan of $400 million, as the loan was oversubscribed.

While the BSP initially invited only 12 banks, the deal was oversubscribed, prompting the BSP to accommodate other lenders based in Asia, the United States and Europe.

The following banks will be shelling out about $50 million: Banco de Oro/JP Morgan, Bank of the Philippine Islands, BNP Paribas, Deutsche Bank AG, Hongkong Shanghai Banking Corporation, ING Bank, Metropolitan Bank and Trust Company, Rizal Commercial Banking Corporation and Standard Chartered Bank.

Another group of banks will lend $30 million each to BSP. These are the Bank of Tokyo-Mitsubishi, KBC Bank N.V., Australia and New Zealand Banking Group, China Trust, Sanwa Bank, Sumitomo Bank, Development Bank of Singapore and Fiji Bank.

The loan, according to BSP Governor Rafael Buenaventura, will be used to re-finance the BSP’s maturing obligations this year of about $870 million.

At the same time, a portion of the syndicated loan, will be used to prop up the country’s gross international reserves (GIR) which as of end February was at a low of $14.17 billion.

Buenaventura added the syndicated loan was a good deal with the BSP getting a margin of 270 basis points over six-month London inter-bank offered rates. This is within the BSP expectation of a lower spread of below 300 basis points.

"The substantial commitments received from a diverse group of banks are a concrete manifestation of the improved confidence of the international financial community on the Philippine economy," Buenaventura said.

As early as last year, the BSP was contemplating on a club loan but decided to put it off and waited for spreads on bonds to improve and interest rates to get lower.

At the height of the political crisis which led to the ouster of former president Joseph Estrada, the BSP put at bay a $400-million club loan because of higher premiums being asked by investors.

Also, foreign investors demanded higher premiums for their exposure to sovereign debt instruments issued to emerging markets as implied by the widening spread last year over benchmark US treasuries.

The scenario has since then improved with local key rates trimmed to pre-juetengate levels as it tracked the US Federal Reserve’s reduction of its own key policy rates.