Philippine Daily Inquirer
12:19 am | Saturday, September 22nd, 2012
Credit Suisse, Deutsche Bank and HSBC will serve as lead arrangers for the $1-billion global bonds and $500-million debt securities the government is planning to sell in the international and domestic capital markets.
A ranking government official involved in the matter said the Department of Finance on Friday completed the approval process for the bond-sale lead arrangers. Credit Suisse, Deutsche and HSBC were given the go-ahead to form their own consortia, which will include several banks that will assist in the bond sale.
The $1 billion worth of global bonds to be issued offshore are intended to be denominated in pesos. The objective of a peso-bond issuance is to avoid increasing the government’s exposure to foreign exchange risks. The proceeds are meant to beef up the government’s funds for debt settlement.
The $500 million worth of bonds to be issued in the local capital market will be denominated in US dollars because proceeds of the onshore issuance will be used to pay off maturing obligations that are denominated in the greenback.
Finance Secretary Cesar Purisima said the government has become inclined to borrow more in pesos than in foreign currencies. This is a strategy to limit the government’s exposure to foreign exchange risks, which tend to bloat debts in local currency terms in case of a depreciation of the peso.
Purisima said the government has been reducing its dollar bond issuances over the last two years. “Because of this, our vulnerability to external shocks has been reduced,” Purisima said.
Besides preferring peso- over dollar-denominated debts issuances, Purisima said the government also preferred issuing bonds with longer rather than shorter maturities. However, the finance chief said the government was keen on avoiding having a heavy concentration of maturities in any single year.
“Our objective is to lengthen maturities, reduce bunching up [of bonds maturing in the same years], reduce foreign currency component and reduce cost,” Purisima said.
The government is expected to issue $1.5 billion worth of bonds soon. It is optimistic that it can sell the bonds at a favorable price given what officials claimed as the Philippines’ improving credit fundamentals.
Purisima said the Philippine government’s outstanding debt of about P5 trillion was just about 50.5 percent of the country’s gross domestic product. The debt-to-GDP ratio, which was more than 70 percent in the mid-2000s, has consistently declined over the years, he said.
The government also enjoys a healthy level of foreign exchange reserves, which are currently at a record high of $80 billion. This is five times more than the country’s foreign currency-denominated debts maturing within a year.
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Tags: bond float , Business , Credit Suisse , debt settlement , Deutsche Bank , HSBC
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