RP sets roadshow for Samurai bond issue

MANILA, Philippines - The Philippines, one Asia’s biggest sovereign issuer, has moved a step closer in starting yet another fund-raising activity, particularly the issuance of the so-called Samurai or yen-denominated bonds, proceeds of which would be used to plug its widening budget deficit.

A government team led by National Treasurer Roberto Tan is scheduled to start its roadshow in Japan tomorrow to drum up support for the proposed Samurai bonds, Tan said during the weekend.

The actual issuance may take place between the third week of February and the first week of March, Tan said, adding that the Philippines and the Japan Bank for International Cooperation, which would guarantee the issue, would need time to complete the documentation requirements.

The government is embarking on the Samurai issuance to complete its additional commercial borrowing requirements of roughly $1 billion after earlier raising $1.5 billion in dollar-denominated bonds early this month. It earlier raised its commercial borrowing requirements to $2.5 billion from $2 billion previously following a revision in its budget deficit ceiling for the year to a whopping P293 billion from the already revised P233.4 billion. Borrowings from multilateral lenders will remain at $1.8 billion as earlier programmed.

Fiscal authorities said the government had to raise its budget deficit because of the lingering impact of the global financial turmoil and after two typhoons struck the country last year.  They also cited the implementation of the so-called revenue-eroding measures as reasons for the revision.

According to estimates made by the Department of FInance, state coffers will suffer a dent of roughly P60 to P65 billion yearly because of the implementation of what it calls revenue-eroding measures.

Market sources expect the Philippines to raise roughly $500 million through the sale of Samurai bonds.

One source said the government is unlikely to complete the needed $1 billion from Japan investors because they are not that familiar with Philippine sovereign issues as it has been a long-time since Manila sold yen-denominated bonds.

To meet the remaining commercial borrowing requirement of $500 million – if the government successfully raises the $500 million from Samurai bonds – it may do another dollar-denominated bond sale.

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 Japanese Yen 50 billion.

For this year’s Samurai issue, the government is looking at selling via private placement or mostly to institutional investors such as Japanese insurance companies and mutual funds.