US okays RP’s $1.2-B bond issue

The US Securities and Exchange Commission (SEC) has approved the request of the Philippines to issue $1.2-billion worth of debt securities to partially fund this year’s widening budget deficit and to complete its offshore borrowing requirements for 2002.

Finance Secretary Jose Isidro Camacho, who is currently on a deal roadshow in the US and later on in key cities in Europe, said yesterday the US SEC’s approval should boost investor’s confidence in the country’s sovereign debts.

"This is an important development for the Philippines in enhancing access to the US capital markets and providing international investors the opportunity to invest in Philippine sovereign credit under an open, transparent and secure process," Camacho said.

The registration with the US SEC covers a maximum aggregate principal amount of $1.2 billion or its equivalent in other currencies, of debts securities and warrants that may be offered or sold in the United States with immediate effects. The securities are expected to be offered on a delayed or continuous basis in the next two years.

The government sought the approval of the American SEC for the issuance of the bonds sometime in July this year. But it was overtaken by events such as the Argentinian financial crisis and the Sept. 11 terrorist attacks on the US that made investing in emerging countries like the Philippines risky with the widening of bond spreads.

American finance and monetary authorities also reportedly wanted the Philippine government to first legislate an anti-money laundering bill which Congress approved on Sept. 30, the deadline set by the Paris-based Financial Action Task Force.

The original amount sought by the Philippine government was just $500 million but this was subsequently raised to $1.2 billion, including a previous application that was also pending with the US SEC.

A portion of the proceeds of the $1.2 billion bond float will go into helping plug this year’s budgetary shortfall projected P145 billion, while the balance will help complete government’s offshore borrowing requirements for next year.

The National Government has raised its borrowing requirements for next year to P272.9 billion, P5.5 billion more than the original program of P267.4 billion.

The Department of Finance (DOF) said the adjustment was necessary if government were to finance its programmed deficit of P130 billion for next year.

To ease the pressure to draw down fro the existing cash of the Bureau of Treasury, the government decided to also revise its borrowing mix in favor of foreign inflows.

Out of the required gross borrowings of P272.9 billion, P144.1 billion will be from foreign sources while domestic loans will comprise P128 billion.

Government said it prefers to tap offshore loans so as not to crowd out the private sector from having access to domestic sources of funds.

Camacho had previously said government has already several funding options in place for more than half of its projected $1.3 billion external funding requirements for next year but wants to diversify into other sources that provide cheaper funds.

At the same time, it will also double the use of official development assistance (ODA) credits and focus on credit enhancements through loan guarantees from the Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI) and the World Bank.