RP slates European roadshow to pre-fund 2006 requirements

As investor confidence picked up following the outlook upgrade by Fitch Ratings, the Arroyo administration said yesterday it may pre-fund its 2006 requirements as officials planned a no-deal European roadshow this June.

Finance officials said there were no firm plans but pre-funding was possible depending on the market’s reception of the government’s progress in its efforts to consolidate its fiscal position.

National Treasurer Omar Cruz said the no-deal roadshow was initially scheduled for June this year, headed for several major US and European cities.

Cruz said pre-funding was not being planned specifically but commented that the decision would depend entirely on how the Philippine mission would be received in the roadshow.

"But I think they’ll receive us well," Cruz said. "Our main concern is to update our European investors on the recent developments in our fiscal consolidation program."

Cruz said the line up has not been finalized but expected to join the mission were Finance Secretary Cesar V. Purisima, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amando M. Tetangco Jr. and other top members of the Arroyo administration’s economic team.

Cruz said the roadshow would not include Asian cities, explaining that European investors need the comprehensive briefing more than any other investor group since they were not as familiar with the Philippines as other groups.

"European investors are unique because when they buy, they buy to hold," Cruz said. "They don’t usually trade the bonds that they buy, they see it through."

After Fitch’s outlook upgrade, other credit rating agencies are widely expected to follow suit and at least put their credit rating outlook back to "stable" after downgrading it to "negative" last year.

Judging from the response to the government’s $750-million global bond float which officials said was eight times oversubscribed, as well as the market reaction to Fitch’s upgrade, Cruz admitted the Arroyo administration’s borrowing options have become even wider.

With only about $850 million more that needed to be raised for 2005 and still seven months to go in the year, pre-funding its 2006 requirements was possible.

The Bangko Sentral ng Pilipinas (BSP) has already given the Arroyo administration the green light to launch euro bonds this year but finance officials have been holding off the issue until they get clearer indications of a receptive market.

When asked whether the European roadshow would ultimately lead to the issuance of Eurobonds, Cruz said officials will base their final decision on market reception.

"If there is overwhelming response then we will probably do it," he said. "We have been aiming to diversify our portfolio so it’s not entirely out of the picture."