Home Guaranty to cut planned bond offering

MANILA, Philippines - State-run Home Guaranty Corp. (HGC) is willing to reduce the size of its planned bond offering to P2.5 billion from the original P5.5 billion to hasten the approval process, HGC president Gonzalo Bongolan told reporters yesterday.

The Department of Finance (DOF) is still studying the proposed 10-year bonds and wants the agency to lower the amount of the issuance as part of the management of government debt.

Bongolan said the agency is willing to settle for a lower amount of the bond issue, proceeds of which would be used to refinance the agency’s maturing obligations.

Next year, Bongolan said HGC needs to settle P3 billion worth of debt owed to the Social Security System (SSS), the state-owned pension fund for private employees. The amount represents unpaid guarantees.

The agency would still be able to proceed with the issue before the second quarter of the year so that it has the funds ready by next year,Bongolan said.

Bongolan expressed hopes that the DOF would give the agency the go-signal to issue the full amount of P5.5 billion.

 HGC is a government-owned and controlled corporation mandated by law to extend guarantee cover to all bond issuances of other state-run firms.

The last time HGC operated with no unpaid guarantees was in the middle 90s before the Asian financial crisis hit the country.

Nonetheless, Bongolan said that from total obligations amounting to P16 billion in 2001, the agency was able to trim it to just P3 billion at present.

Bongolan said the bonds would also have the usual “sweeteners” such as the guarantee cover of the national government and that it would be tax-free unlike the regular debt papers issued by the Btr.

He also said that the HGC issue would have the sweeteners of the bonds issued by the Home Development Mutual Fund (HDMF) or Pag-IBIG Fund.

Last March, Pag-IBIG Fund successfully sold P11.963 billion in five-year bonds, proceeds of which would be used to refinance existing debts and finance existing programs.

The Pag-IBIG bonds serve as alternative compliance by banks with the Agri-Agra Law and counts as reserve assets of insurance companies and compliance with the Urban Housing Development Act.

If HGC’s bond offer pushes through, this would be the agency’s fourth bond sale since 2002 where it floated P7 billion worth of debt papers.

In 2004 and 2006, the HGC sold P3 billion and P12 billion worth of bonds, respectively.

If on the other hand, HGC won’t be able to raise funds through the bond sale this year, it would be under heavy pressure to provide guarantee services to home buyers.