Government issues ¥50B of Samurai bonds

The government has successfully launched ¥50-billion or $406-billion worth of Samurai bonds through a private placement with institutional investors. The proceeds of the bonds will be used to partially fund government’s financing requirements for next year.

In Manila, Finance Secretary Jose Isidro Camacho said that while the Philippine government will be depending more on offshore borrowings in the coming years to plug its budget deficit, it does not see the immediate need to tap the International Monetary Fund (IMF) for new loans.

"Under the present circumstances we do not plan or intend to get loans from the IMF," Camacho said, adding however, that this could change, depending on future developments.

The Samurai bonds are insured with Overseas United Loan Insurance (OULI) from Nippon Export and Investment Insurance (NEXI). The bonds have a 10-year maturity and a coupon rate of 1.83 percent.

The NEXI OULI provides investors a fixed level of protection from political and commercial risks during the life span of the bonds, making risks substantially lower for investors while still offering attractive yields that are above comparable Japanese government bonds.

The Samurai bond is the Arroyo administration’s biggest issuance in the Japanese market with the longest tenor possible and at the lowest cost. Compared to previous Samurai bonds issued by the Philippine government, the cost of funds was trimmed by a broad margin of about 3-3.5 percent.

The bond was arranged by Fuji Bank Ltd., Nomura Securities Co. Ltd. and Daiwa Securities SMBC Co. Ltd.

The government is till trying to complete its offshore financing requirements for 2002. Tapping the Japanese bond market is one of several options government is looking at to raise its projected $1.3 billion foreign borrowings for next year.

While more than half of its projected $1.3-bilion external funding requirements for next year is already covered, government wants to diversify into other funding sources to make borrowing cheaper for government.

Camacho also recently led a roadshow for a $270-million Eurobond float.

In the recent working visit of President Arroyo and her economic managers to the US, the government was able to acquire a $30-million loan from the World Bank and the IMF. This is part of the total $1.7 billion committed by US President George W. Bush and the corporate Sector to get the Philippine economy rolling in the next three years.

Finance officials said the government wants to complete its borrowings as early as possible as it anticipates spreads on emerging markets’ sovereign borrowings to widen with the uncertainty brought about by the recent terrorist attacks on the US.

Moreover, the government is trying to get more financial concessions from international financing institutions, including loan guarantees, enabling government to complete its financing requirements while minimizing interests costs. – Rocel Felix