Government mulls flotation of $1-B bonds next month

Government plans to issue as much as $1 billion worth of bonds in the US, Japan and Europe next month, Finance Undersecretary Juanita Amatong said yesterday.

Amatong said government needs to borrow a bigger amount to replace the $400-million Banking Sector Reform Loan (BSRL) that will lapse next month.

"We are going to the market to replace funds that should have come from the BSRL loan," Amatong said.

She said, however, that the government is flexible on the amount of loans to be sourced from the international debt market since it also wants to prioritize domestic borrowing to give the lackluster local lending a boost. "We also want to borrow more domestically," she said.

The government’s planned borrowing mix for the year to plug its budgetary shortfall of P145 billion is 25 percent foreign borrowing and 75 percent domestic credit.

Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura said foreign borrowings could be affected by lingering concerns on political and economic stability especially with election-related violence but this should all simmer down by June and July.

Government originally intended to tap the debt market this month but had to put it off because of the added political risk premium that could push up interest rates.

Amatong said among those interested in underwriting the bond flotation are JP Morgan Chase, Morgan Stanley, SBC Warburg, ABN-AMRO and Lehman Brothers.

Earlier, Amatong said, government dropped plans to acquire a $200-million loan from the debt market, and instead, will incorporate the loan into the bigger planned borrowing.

The government will push for a "deal roadshow" next month that will cover most of its financing requirements for the year of about P191.5 billion.

The planned borrowing will be used to help fund an expected P145-billion budget deficit this year. As of last month, the budget gap totaled P36.72 billion or P1.6 billion lower than the P38.27 billion targeted for the period.

Earlier, Amatong said the government planned a road show next month for the proposed bond float.

She said the government aims to raise between $500 million and $700 million from the bond float, but added that government was willing to issue more if there was demand.