BSP approves Napocor’s additional $100-M loan

The Monetary Board (MB), the policy-making body of the Bangko Sentral ng Pilipinas (BSP), has approved the $100-million additional foreign loan application of the state-owned National Power Corp. (Napocor).

Sources privy to the recent MB meeting said "Napocor has already raised $300 million earlier this month and could raise the remaining $100 million later."

Finance Undersecretary Roberto Tan earlier said the state-run power generation company may need at least $600 million to $700 million for its financing requirements this year.

Napocor has successfully issued $300 million six-year floating rate notes to further boost the power firm’s already improving financial condition.

Power Sector Assets and Liabilities Management Corp. (PSALM) president Nieves L. Osorio said the funds will be used to finance the maturing debt obligations, capital expenditures, and general funding requirements of Napocor and PSALM for 2005.

To mature in 2011, the notes carry an unconditional and irrevocable guarantee from the Philippine government and pay a quarterly coupon of three-month US dollar (USD) LIBOR (London Interbank Offered Rate) plus 425 basis points.

LIBOR is the rate banks charge each other for short-term eurodollar loans. It is frequently used as the base for resetting rates on floating-rate securities.

The transaction was offered in Asia at the initial price of $200 million. But based on strong investor response, the final issue was increased to $300 million. The issue attracted an order book of over $500 million from 85 different accounts across Asia, Europe and North America.

The notes are expected to be rated BB-/BB by Moody’s and Fitch, consistent with the ratings of the Philippines’s long-term external debt.

Arranged by Bear, Stearns and Co. Inc. as sole lead manager, the transaction represents Napocor’s second unsecured USD issuance in the international capital markets since 2002. For the two years prior to this issuance, the state-owned power firm had met most of its external funding requirements through borrowings from the National Government, issuance of local bonds, and credit-enhanced transactions involving insurance providers such as the Overseas Private Investment Corp. and the Asian Development Bank.

Osorio said Napocor’s successful reentry in the international capital markets is evidence of increasing confidence by foreign investors in the structural reforms that PSALM and Napocor have been implementing since the Electric Power Industry Reform Act (EPIRA) of 2001 was enacted.

EPIRA seeks to institute changes in the Philippine electricity industry. PSALM was created under this law to handle the privatization of Napocor.

She said cash deficit reduction programs, the implementation of efficiency measures, and the absorption by the National Government of P200 billion in debt obligations should translate to a sharper financial picture for Napocor in the years to come.