JBIC cuts guarantee fee for RP's 'Samurai' bonds

MANILA, Philippines - The Philippines has moved a step closer in its bid to lower borrowing costs, particularly for its planned issuance of Samurai bonds or yen-denominated bonds, National Treasurer Roberto Tan said.

“Hopefully, in the next few weeks we will sign on the dotted lines,” Tan said, referring to the agreement obtained by the government from the Japan Bank for International Cooperation (JIBC) to lower the guarantee fee.

The Philippines and JBIC are expected to finalize the agreement seeking to lower the guarantee fee for the proposed bond issuance, after months of negotiations, Tan said.

Samurai bonds are yen-denominated bonds issued in the Japanese financial market by a foreign government or company.

The Philippines and JBIC signed a memorandum of understanding (MOU) for the planned Samurai bonds last June.

Under the MOU, JBIC would guarantee 95 percent of the present value of all principal and interest payments.

Since June, the government has been lobbying before JBIC for lower or a “more competitive” guarantee fee to effectively reduce its borrowing costs.

The government is looking at selling $500 million in Samurai bonds but Tan said nothing is final yet. He also said the actual sale may take time.

At the same time, Tan said the option to raise funds through a third global bond issuance is still being considered.

“The option is there,” he said.

Tan said the government is looking at proposals for the global bond sale submitted by investment banks.

Last July 18, the government successfully raised $750 million in dollar-denominated bonds to foreign investors to plug its widening budget deficit. The country’s 2009 deficit ceiling has been raised to P250 billion from P199.2 billion previously.

The last time the Philippines tapped the Japanese Capital Market was in 2001 with the issuance of Shibosai bonds, also a form of Samurai bonds, amounting to ¥50 billion.

The government needs to raise funds to finance a swelling budget deficit, widened by the prolonged impact of the global financial turmoil and the two typhoons that recently ravaged the country.