RP to launch Samurai bond issue by end-Sept
abs-cbnNEWS.com | 06/23/2009 9:02 PM
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MANILA - The government may issue Samurai bonds within the third quarter to raise much needed funds to plug the country's ballooning budget deficit.
Finance Secretary Margarito Teves said the initial tranche of the planned yen-denominated bond issue, amounting to as much as $1.5 billion, would be done via private placement before the end of September. The issue will be underwritten by Japanese commercial banks and securities firms.
Teves said the government has held discussions with three commercial banks, including Bank of Tokyo-Mitsubishi, Sumitomo-Mitsui Banking Corp. and Mizuho Bank, as well as securities firms Daiwa Securities and Nomura Securities during the recent state visit of President Gloria Arroyo in Tokyo last week.
"All of them said this (bond issue) can be done in 6 to 8 weeks,” noted Teves, adding that details of the issuance such as the size and price are still being finalized.
Rosalia de Leon, officer-in-charge of the finance department’s International Finance Group, said the Philippine government has inked a memorandum of understanding with Japan Bank of International Cooperation (JBIC) on the guarantee of up to $1 billion worth of Samurai bonds.
"We signed an MOU on samurai bond issue which marks entry of Philippines to Samurai market," de Leon said.
Under the agreement, JBIC will guarantee 95 percent of the present value of all principal and interest payments while the Philippine government will have to get a third-party guarantee for the remaining 5 percent.
The last time the Philippines issued Samurai bonds was in December 2001. It raised 50 billion yen.
For this year, the country has set a budget deficit ceiling of P250 billion or 3.2 percent of gross domestic product (GDP), higher than the earlier revised target of P199.2 billion or 2.5 percent of GDP.
However, several international financial institutions were looking at a wider budget gap for the Philippines, given the looming economic recession. The government has a GDP growth forecast of 0.8 to 1.8 percent as against the World Bank's -5 percent and the International Monetary Fund's -1 percent forecasts.
In light of the widening budget gap, National Treasurer Roberto Tan said the government has jacked up total borrowings from P614 billion to P661 billion, of which 70 percent would be sourced from domestic creditors and 30 percent from foreign ones.
Tan noted the government has shelved a plan to issue retail treasury bonds next month due to rising interest rates in the domestic market.
"Definitely it has been deferred,” he said.
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