Government, JBIC firm up guarantee terms for Samurai bond issue

MANILA, Philippines - The Japan Bank for International Cooperation (JBIC) and the Philippines have “firmed up” the terms of the guarantee agreement for the government’s planned issuance of Samurai bonds or yen-denominated bonds, National Treasurer Roberto Tan said yesterday.

However, he said due to “documentation requirements,” the actual issuance is not likely to happen this month.

The government would now wait for the advise of underwriters on the right timing of the issuance.

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

In June last year, the Philippines and JBIC signed a memorandum of understanding (MOU) for the planned Samurai bond issue.

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

Since last year, 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 to $1 billion in Samurai bonds but Tan said nothing is final yet.

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.

Aside from Samurai bonds, the government is also planning to sell either euro- or dollar-denominated bonds to plug its swelling budget deficit.

Market sources said the government may sell a combined $2 billion in euro- dollar- or yen-denominated bonds this month as it has done every year since 2005.

As of end-November 2009, the budget deficit already hit P272.5 billion. The government expects the budget gap for the whole of last year to fall below P300 billion. This year, it expects the budget deficit to reach P293 billion, above the initial estimate of P233.4 billion.