Philippines eyes $1.1-B in peso bond sales


Posted at Aug 04 2010 12:36 PM | Updated as of Aug 05 2010 02:46 AM

MANILA, Philippines (UPDATE) - The government wants to raise at least $1.1 billion from the sale of retail Treasury bonds this month and a global peso bond issue later this year to partly fund a record nominal 2010 budget gap, officials said on Wednesday.

Finance Secretary Cesar Purisima said the new government was looking at a minimum size of $500 million for the planned sale of global peso bonds before the end of the year.

"I think it should at least be half a billion dollars," Purisima told reporters when asked about the size of the offer. "That would probably be the minimum, because lower than that might not meet the distribution requirements to achieve my goal of really establishing a market outside the Philippines."

Officials have said the Philippines, Asia's largest sovereign issuer of foreign currency debt, plans to offer global peso bonds with maturities of five to 10 years as part of efforts to manage its foreign currency exposure.

The bonds are expected to be denominated in pesos, with settlement in US dollars.

Purisima said he favoured longer-term debt.

"My preference is always as long as possible," he said, adding the government will rely on its financial advisers to decide on the most favourable debt maturity to offer.

The Philippines was studying Chile and other countries that have issued similar bonds this year, Purisima said.

Chile raised $1 billion in 10-year global bonds and $520 million in 10-year bonds in its own currency last week. Colombia also sold $1.3 billion of similar bonds this year.

"I think we will not veer away from the way they did it," Purisima said, adding the government wants to take on any tax liabilities related to the bond issue to attract investors.

The Philippines relies heavily on local and foreign debt to bridge its fiscal gap, expected to widen to P325 billion ($7.2 billion), or 3.9%of GDP, this year from P298.6 billion last year.

Good cash position

National Treasurer Roberto Tan said the government will sell P25 billion of retail bonds at an auction on Aug. 10. He reiterated the final amount, including the public offer to retail investors running until Aug. 18, is unlikely to reach 100 billion pesos after last year's total retail issue was more than 100 billion.

"We are not looking at that volume," Tan told reporters when asked if the retail sale will match last year's amount. "We have a good cash position."

The government plans to sell P10 billion of 5-year bonds, 10 billion of 7-year bonds and P5 billion of 10-year bonds, said Roberto Juanchito Dispo, executive vice president at First Metro Investment Corp., one of the eight local banks given the mandate for the retail sale.

The issue is meant to refinance P36.47 billion of 3-year retail bonds that fell due this week, and P38.67 billion of 5-year retail debt maturing in September.

On Wednesday, the 5-year government bondwas quoted at 6.169% in the secondary market on Wednesday. The 7-year bond was quoted at 7.126% and the 10-year paper was quoted at 7.549%.