Government to issue P3.5-billion bonds for irrigation rehab

MANILA, Philippines - The government announced it will be issuing P3.5 billion worth of bonds to finance the repair and rehabilitation of irrigation facilities nationwide.

The National Development Co. (NDC), the investment arm of the Department of Trade and Industry (DTI), said they will offer NDC Agri-Agra Bonds (AA Bonds) that would raise P3.5 billion to support the irrigation projects of the National Irrigation Administration (NIA).

The bond float is scheduled on Nov. 25, 2009. This is the fourth tranche of the NDC AA Bonds. The issuance is in accordance with EO 83 issued on Dec. 25, 1998 and EO No. 530 issued in May 2006.

NDC said the bond proceeds will be used to fund the NIA repair and rehabilitation of irrigation facilities, which would restore some 33,000 hectares of rice lands and to repair and upgrade functional irrigation systems servicing another 20,000 hectares.

The funding will also restore and rehabilitate additional irrigation facilities nationwide covering 21,600 hectares and 50,000 hectares, respectively.

The AA Bonds are obligations of the NDC with a direct and unconditional guarantee by the government and will have a term of five years from the date of issue.

Interest payments shall be made semi-annually and on the part of the investors, interest income from the bonds shall be tax exempt.  Also, the AA Bonds have the following eligibilities: as liquidity for government deposits; and as security for the faithful performance of trust duties.

The bond issuance is an alternative compliance to PD 717 (Agri-Agra) which institutional bondholders can subscribe as the second tranche of AA Bonds issued in 2002 is set to be retired in December 2009.

The issuance of the long-term bonds is intended to support projects for economic growth under a revitalized rural development program to be funded by NDC.

Last October, Trade Secretary Peter B. Favila said that the NDC will be issuing P50 billion reconstruction bonds in order to help fund the rehabilitation projects of areas destroyed by tropical storms Ondoy and typhoon Pepeng.

Favila said the P50-billion from the bond issuance will be used for reconstruction projects. He said local government units (LGUs) or other agencies can apply for funding to the NDC.

He said most likely, the NDC will be working with the Department of Public Works and Highways (DPWH) for identification of possible projects.