RP to issue $500-million Samurai bonds

MANILA, Philippines - The Philippines may issue at least $500 million in Samurai bonds or yen-denominated bonds through a private placement which would cater mostly to institutional investors, National Treasurer Roberto Tan said yesterday.

He said that the government has already been receiving underwriting proposals from global banks for the planned issuance of the bonds.

“Majority, if not all have recommended a private placement,” Tan said yesterday.

A private placement, in contrast to a public offering, is a direct offering of securities to certain investors. It caters mostly to institutional investors such as insurance companies and pension funds. Also, in terms of documentary requirements, a private placement is less stringent in terms of disclosure requirements.

On the other hand, Tan said a public offering would entail a lot of documentary and disclosure requirements. It may also cater to retail investors.

Tan, nevertheless, said that the actual issuance is not likely to happen this month because of all the documentation requirements needed to launch the bond sale.

The Japan Bank for International Cooperation and the Philippines have “firmed up” the terms of the guarantee agreement but the actual signing has yet to happen. 

A source said the actual signing may happen as early as this week to coincide with the visit of JBIC president Hiroshi Watanabe to the country.

Samurai bonds are yen-denominated bonds issued in the Japanese financial market by a foreign government or company.

In June last year, the Philippines and JBIC signed a memorandum of understanding (MOU) for the planned Samurai bonds issue.

Under the MOU, JBIC would guarantee 95 percent of the present value of all principal and interest payments.

Since last year, the government has been lobbying before JBIC for a lower or a “more competitive” guarantee fee to effectively reduce its borrowing costs.

The last time the Philippines tapped the Japanese Capital Market was in 2001 with the issuance of Shibosai bonds, also a form of Samurai bonds, amounting to ¥50 billion.

Last week, the government sold $1.5 billion in global bonds, making it the first Asian sovereign debt issuer.

Despite raising $1.5 billion from the global debt market already and possibly another $500 million in Samurai bonds, Tan said the government is still open to selling euro-denominated bonds this year.

“We’re still open to that,” Tan noted.

The government is raising funds to plug its budget deficit which already hit P272.5 billion as of end-November 2009.

The government expects the budget gap for the whole of last year to fall below P300 billion. This year, it expects the budget deficit to reach P293 billion, above the initial estimate of P233.4 billion.