Monday, 20 September 2010

RP launches sale of $500 million worth of peso global bonds

By Iris C. Gonzales (The Philippine Star)

MANILA, Philippines - The Philippines has launched the sale of at least $500 million in global peso-denominated bonds, according to persons familiar with the transaction.

The government is expected to sell more than $500 million in 10-year bonds, the first global local currency bonds for the country. Investors are expected to gobble up the debt because of the tax treatment. The transaction is not subject to interest income of 20 percent, a Finance official said.

In a separate statement, the Investor Relations Office (IRO) of the Bangko Sentral ng Pilipinas (BSP) said the government has mandated Citi and Deutsche Bank as joint global coordinators for the transaction and Citi, Credit Suisse, Deutsch Bank, Goldman Sachs (Asia), HSBC and JP Morgan as joint bookrunners.

The Philippines’ long-term foreign currency debt ratings are Ba3 by Moody’s Investors Service and BB- by Standard & Poor’s or below investment grade.

Proceeds of the bond sale would be used for general budgetary requirements amid a widening budget deficit that is projected to hit P325-billion this year or 3.9 percent of gross domestic product (GDP).

The P325-billion deficit is higher than the previous budget deficit program of P300 billion or 3.6 percent of GDP set by the previous government.

As of end-July, the budget shortfall has already widened to P229.4 billion, already 70.6 percent of the 2010 ceiling.

Finance Secretary Cesar Purisima has said that next year, the budget gap could narrow to P225 billion or 2.5 percent of GDP if the economy grows by seven percent or more than the projected five-percent growth. At five-percent growth, the government expects a budget gap of P290 billion.

The sale of peso-denominated dollar bonds and a dollar debt exchange are among the plans of the Aquino administration to fund its budgetary requirements, lengthen its maturities and manage its debts.

National Treasurer Roberto Tan earlier said the government plans to issue 10-year and 20- or 25-year dollar bonds in exchange for maturing shorter-term bonds in the market.

The dollar debt swap may follow after the sale of peso-denominated bonds but officials have yet to determine the exact timing of the exchange.

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