RP rejects loan offers from international investment banks

Government officials have rejected loan offers from international investment banks during its international roadshow, saying there is no rush for the government to borrow.

Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura told reporters in a teleconference that investment banks have made loan offers to the Philippine delegation attending the roadshow but they have had to be turned down until the administration gets a fuller appreciation of its fiscal position at the end of the year.

According to Buenaventura, pre-funding the Arroyo administration’s 2003 deficit is possible during the last quarter of the year but unlikely during the actual roadshow.

"We might still go into pre-funding but if at all, it will be very opportunistic," Buenaventura said. "There was quite a number of offers to do a deal both in London and New York. We’re just sort of listening to them, not closing our option," he added.

Buenaventura is scheduled to fly to Washington for the final leg of the roadshow which covers Singapore, London and New York. He met with various investors, creditors and ratings agencies.

According to Buenaventura, investment banks have offered various deals, saying this is a good time to tap the credit market should the government decide to pre-fund its financing requirements for 2003.

Buenaventura said there are proposals for various terms specifically to avoid bunching of maturities. "The spreads are reasonable given the dramatic drop in the ten-year instruments which corrected by almost half a percent," he said.

"But the feeling is that there is no rush," the BSP chief said. "We want to consider these offers carefully first and it’s just comforting that these offers are there should we need it."

Buenaventura said it is unlikely that the no-deal roadshow will be turned into a deal roadshow. He said the government is likely to wrap up the presentations first and then get back to prospective creditors after the team has looked more closely at the offers.

According to Buenaventura, the only maturing obligation the Arroyo administration has is the ABN-Amro loan which is incredibly cheap at less than 90 basis points over Libor. "At current rates, it would actually be uneconomical to prepay this one because it’s already cheap," he said.

During the New York leg of the roadshow, Buenaventura said they met mostly with fixed income instrument investors who expressed concern over the country’s fiscal position and the possible impact of the US-Iraq war on the domestic economy.

Buenaventura said the country’s debt structure was explained to the investors in great detail, stressing on the maturity profile which averaged 16 years. "Only about 10 percent of our debt is maturing within a year and these are cheap ones," he said.

The economic team led by Buenaventura and Finance Secretary Jose Isidro Camacho also met with representatives from two rating agencies, Moody’s and Standard & Poors, to discuss the country’s economic situation particularly the fiscal deficit.

"They were actually quite happy about our foreign exchange regime and that we have allowed the currency to float," Buenaventura said.

There were also questions about why the country’ s gross international reserves (GIR) was significantly higher than the target but Buenaventura said this was easily explained since the government has been pre-funding its deficit since the beginning of the year.