Deutsche Bank offers to arrange $1-B, 10-year bond issue for RP

Deutsche Bank is offering to arrange a $1-billion 10-year global bond issue for the Arroyo administration as the government kicks off its efforts to pre-fund the projected 2003 budget deficit with more borrowings.

Documents revealed that Deutsche Bank was making an offer to handle the global bond float which would be offered at 286 basis points over US LIBOR (London Inter-Bank Offered Rate) for 10-year bonds.

The benchmark rate is now at 3.65 percent and documents indicate that Deutsche is willing to do the deal that would effectively offer the bonds at "goodwill rates".

After sending a team of senior economists and finance officials on an international roadshow, the Arroyo administration will now begin in earnest to attempt to raise funds through borrowing from both local and domestic sources.

Deutsche is being particularly generous following the controversy over the alleged double-counting of deals that it had arranged for the Philippine government, an offense that earned the ire of finance officials and threatened to make it difficult for the bank to get into any more deals with the government.

Deutsche was not sanctioned for its offense but officials said their participation in future financial deals of the republic would be marred by their involvement in spurious attempts to boost their market standing.

Finance Secretary Jose Isidro Camacho told reporters that the Department of Finance (DOF) is still investigating reports that at least two foreign banks have been double-counting their deals with the Philippine government in order to improve their standing in the financial market.

According to Camacho, the government could not impose any sanction on these institutions but the appropriate punishment would be meted out by the market itself.

Camacho said the DOF is looking into reports that the Zurich-based Credit Suisse First Boston (CSFB) double-counted its participation in government bond issuances.

CSFB reportedly claimed that it helped the sale of government’s $750-million bonds in January and a $250-million bond float for the National Power Corp. in July.

Deutsche Bank, on the other hand, got into the hot water for claiming that it had done a deal for the Philippine government worth $500 million, over and above a $1-billion deal it was supposed to have handled in March.

The government later denied that there was an additional $500 million deal which would have jacked up interest rates had it gone uncorrected.

"The impact of these misrepresentations, if they are proven, is that their standing in future government deals will be more difficult," Camacho said. "It will definitely affect their ability to do business with us."

Camacho said that although government had specific criteria for selecting investment banks participating in its financial deals, there are also "intangibles" that are being considered.

"Conduct of this sort can only make it more difficult for them to get participation in whatever future deals we will undertake," Camacho said.

According to Camacho, Deutsche Bank had officially apologized to the government for misreporting, acknowledging their mistake including the breach of confidentiality that required them to clear with the government any information that they wished to reveal.

Camacho said the bank official involved has also been sanctioned and is no longer employed by Deutsche Bank.