BSP okays government plan to issue eurobonds

The Bangko Sentral ng Pilipinas (BSP) has approved the National Government’s plan to issue an undetermined amount of euro bonds sometime this year.

The Monetary Board approved the proposed issue last week, paving the way for finance officials to commence negotiations with underwriters to prepare and package the issue.

BSP Deputy Governor Amando M. Tetangco told reporters yesterday that the MB did not set any ceiling for the euro bond offer but approved the plan in principle to allow the National Government to start preparing the transaction.

"When the terms and the amount become final, then the MB will take up the particular plan and approve it with the appropriate ceilings," Tetangco said.

The euro bond is intended to fill up the remaining portion of the Arroyo administration’s 2005 foreign borrowing requirement after the government’s successful dollar bond issue last January where it raised a total of $1.5 billion.

According to Tetangco, there was no rush for the government to borrow after the dollar bond issue. "They will just go to the market when they think the time is ripe for it," he said.

"When the NG goes to the market for the euro bond offer, then they already have the authority to do so and the MB need only to see the specific terms," he added.

Finance secretary Cesar V. Purisima had already said that the government’s debt portfolio is currently under review and there might be room to take advantage of lower interest rates on Euro-denominated borrowings.

"If you look at our exposure, about 50 percent is in dollars," Purisima said. "The rates on euros are lower. So that can be in our horizon."

According to Purisima, banks are proposing several products to the National Government that are now under consideration, including structured financing.

The Arroyo administration raised more than it planned from its global bond offer, borrowing $1.5 billion worth of 25-year bonds at 505-basis points over similar US treasury bonds.

Deutche Bank, one of the bookrunners for the offer, said the issue was the biggest ever in the country’s borrowing history.

According to Deutsche, there were about $8 billion worth of orders. "It underlined that the country is firmly back in play with the emerging market investor base," the bank said.