Eurobond offer seen to raise more than $250M

The government expressed confidence yesterday its Eurobond offering will exceed the original target of raising $250 million.

"there is a strong demand for the issue. I’m certain that with the favorable response, the issue will be oversubscribed," claimed Finance Secretary Jose Isidro Camacho yesterday.

Camacho added government has not yet settled on the final amount, including the final spread, saying this will depend on how the Eurobonds are received. The debt papers have a maturity of five years.

The Department of Finance still has to receive the final report from its underwriters who are still conducting a roadshow in key cities in the European Community. Earlier, the first leg of the roadshow included Milan in Italy; Frankfurt, Germany; Amsterdam, The Netherlands; and London, England.

The DOF has named Deutsche Bank, Salomon Smith Barney and UBS Warburg as joint lead managers for the minimum $250-million worth of Eurobonds government has issued to raise funds for debt-saddled National Power Corp. (Napocor). Bond proceeds will partially cover Napocor’s $530-million funding requirements for this year.

Camacho said government decided to borrow for Napocor to keep the power firm’s borrowing costs down. Had Napocor borrowed on its own, Camacho said the spreads would have been higher by about 50 basis points.

This is the first Eurobond issue of the Arroyo administration. A $750-million bond was supposed to be issued in November last year but was shelved because of the political crisis spurred jueteng by the scandal involving then president Joseph Estrada.

The Eurobonds will take the place of the previously planned bond flotation of $400 million which was shelved by the government because of the perceived risk of lending to the state-run power firm.

Analysts said government will have to borrow for Napocor because creditors are wary about extending new loans to the power firm. With no new capital infusion and struggling with huge debts amid its privatization process, creditors consider lending to Napocor too risky.

Napocor will need $1 billion next year to settle its maturing obligations, while a portion of the amount will be used to fully cover its programmed operating expenditures. About $144-million worth of Napocor loans from ING Barings will mature this month. – Rocel Felix