UBS Warburg to underwrite bond issue

Government has picked UBS Warburg to underwrite its planned Singapore bond issue, as the Arroyo administration attempts to tap the international credit market to fund its 2002 budget.

Despite widespread misgivings about its ability to go to the international credit market, it’s all systems go for the government’s plan to issue some S$300 to S$500 million Singapore bonds to be floated possibly this month.

Sources in the banking industry revealed that UBS Warburg had begun drumming up interest for Philippine bonds to determine if the bonds could be fully underwritten despite the concerns expressed by international ratings agencies.

Emerging markets like the Philippines have been having difficulty convincing credit rating agencies of their ability to tap the international credit market.

According to sources, UBS Warburg was chosen over Citibank and ING Barings, marking the Philippine government’s maiden foray into the Singapore bond market.

The Arroyo administration had originally intended to raise S$300 million from the Singapore bond market, but officials had expressed hopes that UBS Warburg could swing S$500 million out of the offering.

Sources said the Department of Finance (DOF) plans to make an announcement if the offering can be expanded to S$500 million, depending on the initial response of the market.

At the very least, however, sources said UBS Warburg should fully underwrite S$300 million.

However, the DOF has not made a decision on whether it wants to swap the proceeds of the bond issue into US dollars.

Non-Singaporeans are required to swap the proceeds of bond issues into US dollars but the DOF said the Philippine government was given an option to reserve the Singporean currency.

The Arroyo administration is in need of funds to finance a P120-billion budget deficit in 2002. Aside from the Singapore bond issue, the finance department is also working on a Japanese bond issue worth $300 to $500 million.

The Japanese bond issue would be in the form of a private placement, known in Japan as Shibosai. Government initially planned to float this issue next month.