Monetary Board okays guarantee fee for Samurai bonds

MANILA, Philippines - The Philippines would have to pay a commitment fee of 75 basis points of the principal amount of the $1.1-billion Samurai bonds guaranteed by the state-run Japan Bank for International Cooperation (JBIC).

Armando Suratos, officer-in-charge and Deputy Governor of the Bangko Sentral ng Pilipinas (BSP), told reporters that the amount of guarantee fee was one of the salient points approved by the central bank’s Monetary Board (MB) last week.

Suratos said the guarantee fee would apply to 95 percent of the $1.1 billion or ¥100 billion bonds to be sold by the Philippine government on March 2 that would be guaranteed by JBIC.

The guarantee fee was one of the major issues that stalled the negotiations between the Philippines and Japan over the planned issuance of Samurai bonds.

The Philippine government signed an indemnity agreement with JBIC last February 25 in connection with the proposed $1.1 billion Samurai Bond issuance under JBIC’s Market Access Support Facility (MASF).  

The agreement shall implement the guarantee commitment of JBIC under the Framework Agreement signed between the same parties in Tokyo, Japan last Feb. 16.

Under the Agreements, JBIC agreed to extend partial guarantee to the bonds with coverage of about 95 percent of all payments under the bonds computed on a present value basis. 

Following a successful pricing of the bonds last February 23, the Philippines is poised to issue on March 2 the maximum amount of $1.1 billion.

Suratos said the issuance is being jointly lead-arranged by Daiwa Securities Capital Markets Co. Ltd., Mitsubishi UFJ Securities Co., Ltd. and Nomura Securities Co., Ltd.

A Samurai bond is yen-denominated and issued in Japan by a non-Japanese entity. The bonds that are termed Shibosai would be sold through a private placement. The Philippines last sold Japanese bonds in 2001.

Proceeds of the bond sale would be used to finance the country’s swelling budget deficit.

The Philippines booked a record deficit of P298.5 billion or 3.8 percent of gross domestic product (GDP) last year from P68.1 billion or 0.9 percent of GDP in 2008 due to the full impact of the global economic meltdown.

The amount eclipsed the previous record level of P210.7 billion of 5.3 percent of GDP registered in 2002.