Government to push through with $500-M private placement

The National Government will prioritize the borrowing of $500 million in the next two months from the international debt market through a private placement.

Juanita Amaton, officer in charge of the Department of Finance (DOF) who earlier said a $250-million private placement will not push through next month because of the uncertainties in the debt market resulting from the volatile political situation in the country, said the plan will finally materialize.

Amatong said three banks were chosen by the DOF to handle the $250-million private placement. These are Chase Manhattan Bank, Credit Suisse and Hongkong Shanghai Banking Corp. "This should be completed between now and mid-June," she said.

At the same time, National Treasurer Sergio Edeza said that another $250 million in private placements will also be firmed up by July.

Edeza said the government has just updated its financial position and its was decided that government will proceed with raising the funding requirements mandated at the start of the year. He said the two deals more or less will fill up the financing requirements of government in the short-term.

The terms of the loans, according to Edeza, will approximate those acquired by the Bangko Sentral ng Pilipinas when it negotiated earlier this year for a $740-million syndicated loan from 19 local and foreign banks.

The BSP for one, was able to get a spread of 270 basis points over the six-month London interbank rates for the $740-million that will mature in three years.

Amatong, on the other hand, said the DOF has been getting a number of proposals from international investment banks to underwrite government’s programmed foreign borrowings for the year.

Some of those that have offered undertake the planned bond flotations are Deutsche Bank, ABN-Amro, Paribas, JP Morgan, Lehman Brothers, SBC Warburg and Morgan Stanley.

The planned borrowing will be used to help fund an expected P145-billion budget deficit this year. As of last month, the budget gap totaled P36.72 billion or P1.6 billion lower than the P38.27 billion target for the period.

Amatong said the government will be very flexible in its planned borrowings and could increase borrowings to as much as a $1 billion.

By next month, finance and monetary authorities are expected to go on an international roadshow in key cities in the Us, Japan and the European Community to drum up interest for the bond flotations.

The national government could increase to $1 billion the amount of the bonds it would float in the international debt market next month.

In a related development, Amatong said the DOF will also push through with its negotiations with the World Bank for a $150 million to $200 million Public Sector Reform Loan (PSRL). "We have been getting a good response so far," Amatong said.

The PSRL has been proposed along with the Banking Sector Reform Loan (BSRL) in 1998 but only the BSRL pushed through.

The PSRL is being revived now, because government will need to replace the remaining $400 million it was supported, but will be unable to draw from BSRL. Unable to commit several legislative reforms, the government will have no choice but to allow the BSRL loan to lapse this June.