National Government eyes S$300-M bond flotation

The National Government is considering issuing 300-million Singapore-dollar worth of bonds before the end of the year, proceeds of which will be part of its projected $1.3-billion external borrowings for 2002.

This despite the fact that the island state has been in technical recession, registering two successive negative growths in the last two quarters. Finance Secretary Jose Isidro Camacho said Singapore’s economic state does not necessarily mean it is experiencing liquidity problems.

"It could still be feasible since recession is not always related to the liquidity position," Camacho said.

It will be the first time the Philippines will be tapping the Singapore debt market.

"We want to be able to tap other sources especially in the wake of the recent development in the US," Camacho said, stressing the need for emerging markets such as the Philippines to look for other funding sources other than its regular creditors such as the US.

Bangko Sentral ng Pilipinas Governor Rafael Buenaventura said several international banks and investment houses have offered to underwrite the Singapore bond flotation.

Camacho said government is still assessing if the Singapore bond will be pursued. "We are still evaluating the spreads and financing risks," Camacho said.

The plan is part of government’s efforts to diversify its funding options, with emphasis on yen and Singapore-dollar based financing sources. Options include doubling

the use of official development assistance credit and focusing on credit enhancement through loan guarantees from the Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI) and the World Bank.

Earlier, the government was able to get a guarantee from NEXI for its proposed $500-million private placement with Japanese corporations. National Treasurer Sergio Edeza will be going to Japan this week to speed up the Shibosai transaction.

Edeza was authorized by Finance Secretary Jose Isidro Camacho to negotiate for the final terms of the initial issuance of 30 to 50-billion yen worth of Shibosai bonds, the transaction of which will be used to partially fund government’s financing requirements for 2002. Fuji Bank and Nomura Securities as joint-lead managers and Daiwa Securities SMBC as co-lead manager for the initial issuance of 30 to billion bonds.

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.

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