RP seeks backing of foreign guarantee firms

The government is suppor-ting the credit enhancements of foreign guarantee firms such as Nippon Export-Import (NEXI) of Japan to improve the country’s standing in preparation for access to the $1 billion Asian Bond Fund (ABF).

Finance Secretary Jose Isidro Camacho said the ABF has huge potentials for countries like the Philippines, which does not have an investment grade.

"Philippine issues in its plain vanilla form may not be eligible to access the pool of funds contributed by 11 countries in the Asia-Pacific rim to help develop the bond market in this part of the region," Camacho said.

A country planning to issue debt instruments must have a triple AAA or an investment grade rating before an ABF management team considers any investments in such float.

Camacho urged Asian governments and their respective private sector businesses to take advantage of opportunities arising from the proposed $1 billion ABF. The new regional fund was designed to raise coopera-tion between the region’s central banks, as well as help deve-lop the region’s capital markets.

However, the national government could make credit enhancements as in the case when it raised funds for National Power Corp. (Napocor). Thus, Asian nations without investment grades could tap the ABF as a credit enhancement thus allowing them access to borrowings.

"I discussed the possibility that the Nexi could play an ac-tive role in the provision of credit enhancement to Asian borrowers who are not of investment grade,"

Camacho said. "I also encouraged the private sector to look into the opportunities of the Fund which could be another way of gaining positive credit ratings."

International credit insurers are a good example of entities that can enhance the credit worthiness of nations or corporates that do not have credit or investment ratings.