Government completes $750-M global bond offering

The Arroyo administration was able to borrow another $750 million from the global bond market yesterday, completing over half of its foreign borrowing program for 2005.

The global bond was originally set at $500 million but the cap was put at $750 million should market appetite prove to be good enough for another $250 million.

Finance officials said the market turned out better than expected and the offer was eight times over-subscribed with plenty of market appetite left over for future borrowing.

Finance Secretary Cesar V. Purisima told reporters that the government was able to get good prices for its global bonds which was divided into two tranches maturing in 2015 and 2030.

"We were able to get 101.375 or 8.661 percent for the 2015 bonds and 97.875 or 9.726 percent for the 2030 bonds," Purisima said.

According to Purisima, the issue had "relatively good distribution" with investors in the US, Asia and Europe.

"The deal confirms the continued investor support for the Philippines," Purisima said.

As Congress approved the proposed amendments to the Value Added Tax (VAT) law, Purisima said he was "cautiously optimistic" that the international credit market would "continue to reward us positively."

After swearing off 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 new borrowing would give the national government ample room in the next few months, boosting national coffers along with the proceeds of its January global bond float which generated a total of $1.5-billion.

The offer had three lead underwriters: Deutsch Bank, Hongkong and Shanghai Banking Corp. and JP Morgan.

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 financial market.

Cruz said the government was not willing to go into 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.

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

But Cruz said the government was keeping its options open for the rest of the year, depending only 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."