Gov't may sell $250-M bonds next year

MANILA, Philippines – The government may sell $250 million worth of bonds with warrants next year or in the latter part of 2012 if market conditions are ripe, a ranking Finance official said.

 “As an additional feature, we can include warrants to make it more attractive,” Finance Undersecretary Rosalia de Leon said on the possibility that the government may sell bonds with warrants in the offshore market.

However, she stressed that nothing is final yet as the government continues to study its options for its remaining foreign commercial funding requirement of $750 million.

“The warrants can be an additional feature later on if we issue the bonds,” she said.

Warrants are usually attached to bonds as a sweetener that may enhance the yield of the bond, making it attractive to potential buyers. Warrants are tradable instruments.

The issuance of warrants is not new in the Philippines. In 2008, the government issued $1.75 billion worth of bonds which allowed dollar bond- holders to exchange their debt into peso-denominated Treasury bonds maturing in 2032.

Asked if the planned transaction would be similar to the 2008 deal, De Leon replied: “We have not identified the use of the warrants.”

On the remaining $750 million foreign commercial borrowing requirement for the year, De Leon said the government continues to study its options.

She said an offshore borrowing remains an option even as monetary authorities want the government to take advantage of the cash-rich domestic market by just borrowing locally.

This way, the government does not add to foreign exchange supply, which would contribute to the appreciation of the peso against the dollar.

The government is also studying the issuance of selling dollars locally, which would help curb the strong appreciation of the peso against the dollar as it would increase demand for the greenback.

In contrast, borrowing dollars offshore and converting these into peso to finance government projects would boost demand for the local currency and strengthen its value.