PSALM revises plan for $750-M bond float in US, Japan markets

The Power Sector Assets and Liabilities Management Corp. (PSALM) has decided to revise its plan to float bonds in the US and the Japanese markets this year.

PSALM president Edgardo Del Fonso said they have agreed with the Department of Finance and the Asian Development Bank (ADB) to issue next month $500 million worth of yen-denominated bonds instead of the original plan to float the bonds in the US.

The bond flotation in the US will push through early next year, but with a lower amount of $250 million.

The original plan was for an offering of $500 million in the US and $250 million in Japan. Both bond floats will be partially guaranteed by the ADB.

"We have decided to restructure our bond offering scheme. Because if we will use the structure we have right now, which is patterned after those given to Argentina, we will not be able to get the credit rating that we expected," Del Fonso explained.

He noted that the Argentinian guarantee structure provided by the World Bank had defaulted. "We cannot use that same structure if we will issue US bonds," he said.

But he said the new guarantee structure which will allow PSALM to borrow in the Japanese bond market "is acceptable." Nomura Securities will be the lead arranger for the yen-denominated bonds.

According to Del Fonso, the PSALM, DOF, ADB and the bond offering’s financial advisor Salomon Smith Barney are currently studying a new structure for the $250-million US bond offering.

He said the $250-million bridge financing that will be arranged by Citibank, along with four more international investment banks, will also push through next month.

Del Fonso said the total proceeds of $750 million will be used by PSALM to finance the operating expenses of the National Power Corp. (Napocor), including paying off some of the maturing obligations of the state-owned power firm.

For 2002, Napocor will need some $1.5 billion to fund its capital expenditures. Early this year, the power firm was able to borrow $750 million through a piggy back with arrangement with the National Government using a DOF bond offering.

The PSALM head said they were given five to six months to pay off the $250-million bridge financing from the four banks.

"We will use the proceeds from the bridge financing to cover the expenses of Napocor (for the last quarter of 2002), Del Fonso said.

PSALM, he said, will be the one to borrow the $750 million. "We (PSALM) are allowed to borrow for Napocor," he said.