Saturday, 20 June 2009

Philippines obtains Samurai bond guarantee


The Philippines on Friday obtained a guarantee from Japan for a planned Samurai bond offer of up to $1.5 billion dollars, officials said.

The move is a step towards actual issuance of the debt papers, which will be used, based on a guarantee agreement inked by the Department of Finance and the Japan Bank for International Cooperation, for the "general budget to respond to the global financial crisis."

"The parties have agreed to engage in good faith discussions to finalize the terms and conditions of the relevant agreements for each bond issue and guarantee transaction," the memorandum of agreement (MoU) states.

Samurai bonds are yen-denominated bonds sold in Japan by non-Japanese borrowers. Officials early this week initially said the offer would be $500 million but Malacañang later said it could rise to $1.5 billion

National Treasurer Roberto B. Tan said the MoU — signed on the occasion of a working visit to Tokyo by President Gloria Macapagal Arroyo — is a nonbinding agreement.

"It provides an intent for both parties to pursue the bond issuance. Next, there might be a framework agreement, a guarantee agreement and then a [final] memorandum of agreement," he said in an interview.

"We have to know what Japan would be requiring for this. There would be more consultations."

The amount of the offer has not been finalized, Mr. Tan said, adding that the government was considering an issuance of $500 million and up which could be done in tranches.

"JBIC said it can guarantee up to $1.5 billion but we’re thinking of issuing even less than that. But the details have yet to be finalized. I have to talk to Finance Secretary [Margarito B.] Teves first," Mr. Tan sad.

The government’s last week raised its 2009 budget deficit cap to P250 billion, or 3.2% of gross domestic product, from P199.2 billion previously, citing a revenue shortfall amid a slowing economy.

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