NG eyes $750M through global bond offer

The National Government has decided to go back to the credit market, hoping to raise up to $750 million from a global bond offer that was launched yesterday.

After shying away from the global bond market last month, finance officials said conditions have improved enough for the National Government to take advantage of renewed interest in emerging markets.

National Treasurer Omar Cruz said the issue size for the global bond – the second offer this year for the Arroyo administration – is only $500 million, but should market appetite turn out better, the government is willing to borrow up to $750 million.

Last January, the Arroyo administration was able to raise $1.5 billion from its first foray into the foreign market, creating enough room for the government to wait out the uncertain condition of the international market.

Cruz said the government had been avoiding the market because of the fall-out from the downgrade of US giants General Motors and Ford Motors.

GM alone has about $921 billion of debt outstanding and its downgrade was anticipated to have dire repercussions on other bond issuers around the world.

After the two companies were downgraded to junk bond status, the market settled down somewhat and the dust cleared, with investor interest in emerging markets remaining intact.

Cruz said there was "a lot of market interest" but did not disclose what the books actually looked like.

"This much can be said: The market has improved tremendously," Cruz said. "I don’t want to say anything further until this is wrapped up."

If the Arroyo administration manages to raise $750 million, this leaves only $850 million that would have to be raised to complete the government’s $3-billion foreign commercial borrowing program for 2005.

The Arroyo administration had laid out a $4-billion foreign borrowing program for the year but only $3 billion is to come from commercial sources. The remaining $1 billion is supposed to come in the form of official development assistance (ODA).

Cruz said the government is keeping its options open for the rest of the year, depending on market conditions and the size of market appetite for emerging markets.

"It’s not just us, it’s the emerging markets in general that are attracting investor interests," Cruz said. "We don’t know how long it will last, we have to see what comes up."

The National Government’s $1.5-billion global bond offer in January was such a success that the government could have raised up to $2 billion but officials decided not to saturate market appetite since it was planning more borrowing for the rest of the year.