RP eyes ¥50B via bond issue

The government will push through with plans to issue 30 to 50 billion yen worth of Shibosai or private placement of bond offers, the proceeds of which will be used to partially finance government’s funding requirement for next year.

Finance Secretary Jose Isidro Camacho tapped yesterday Fuji Bank and Nomura Securities as joint-lead managers and Daiwa Securities SMBC as co-lead manager for the initial issuance of 30 to 50 billion yen bonds.

The bonds will be guaranteed by Nippon Export and Investment Insurance (NEXI), which should be favorable to the Philippine government since this would translate into cheaper borrowing costs.

Fuji Bank and Nomura Securities bested other contenders which include ING Merrill Lynch, Daiwa Securities, Nikko Salomon, Deutsche Bank Mizuho, Bank of Tokyo-Mitsubishi and Daiwa-Salomon Smith Barney.

Tapping the Japanese bond market is one of several options government is looking at to raise its projected $1.3 billion foreign borrowings for next year.

While more than half of its projected $1.3 billion external funding requirements for next year has been already covered, government wants to diversify into other funding sources to make borrowing cheaper for government.

Specifically, government wants to negotiate for yen and Singapore-dollar based financing sources.

At the same time, it will also double the use of official development assistance (ODA) credits and focusing on credit enhancements through loan guarantees from the Japan Bank for Internal Cooperation (JBIC), NEXI and the World Bank.

Camacho said any residual borrowing requirements will be met through domestic sources.

Finance officials said the government wants to complete its borrowings as early as possible as it anticipates spreads on emerging markets’ sovereign borrowings to widen with the uncertainty brought about by the recent terrorist attacks against the US.

The International Monetary Fund (IMF) downgraded its forecast for global growth to 2.6 percent as two of the world’s biggest economies, Japan and the US, are not expected to post their much-anticipated recoveries. Most emerging markets are largely dependent on these two countries for their own growth as US and Japan consume their products.

Camacho said credit enhancements such as loan guarantees, will enable government to complete its financing requirements while minimizing interests costs.

The guarantee component by either the WB, JBIC and NEXI makes it attractive for lenders to extend borrowings.

For instance, NEXI guarantees 90 percent of loans while JBIC can guarantee up to 95 percent.

Camacho said the Shibosai issue is separate from the bond float worth at least $500 million which government had been considering for this year, but which it was forced to put off because of unfavorable market conditions that were aggravated by the recent terrorist attacks.

A Shibosai float is marketed to a limited number of investors unlike Samurai bonds which are sold openly in the Japanese market.

Last year, the government issued $330 million in Samurai bonds to finance the budget deficit. It also issued $200 million in Shibusai bonds to raise funds for the state-owned Philippine National Oil Company.