PH to issue up to $1.5B global peso notes, dollar bonds

by Karen Lema, Reuters

Posted at Sep 20 2012 02:40 PM | Updated as of Sep 20 2012 10:46 PM

MANILA - The Philippines plans to issue as much as $1.5 billion in global peso notes and U.S. dollar bonds, with some of the proceeds possibly funding a buyback of expensive foreign debt as part of a liability management programme, a senior government official said on Thursday. 

Manila may sell up to $1 billion in peso-denominated global notes to foreign investors and as much as $500 million in dollar bonds in the local debt market, said Rosalia de Leon, head of the international finance group at the Finance Department. 

She said the timing for the issues was not yet set. 

A government source said the domestic sale of dollar bonds may be used to help repay part of the foreign debt of state-run Power Sector Assets and Liabilities Management (PSALM), which has total liabilities of 85 billion pesos ($2.04 billion). 

But De Leon told Reuters that funding PSALM's debt repayments was just one of the options the government was studying for the bond sales. 

The central bank has given Manila the go-ahead for the combined $1.5 billion debt sales. 


The Philippines, one of Asia's most prolific foreign debt issuers, is also looking at reviewing its planned $3 billion overseas bond issues next year, with officials keen on simply increasing its domestic borrowing and tapping the central bank's record high foreign reserves to pay off its foreign debt. 

"That $3 billion... is a very high number given the conditions right now, so we will have to assess that and discuss with the BSP (central bank)," De Leon said. 

"Tapping the central bank's foreign reserves is an alternative we are seriously considering," she said. 

Manila is planning to borrow one-third more in 2013 than this year's $2.25 billion because there are more foreign debt obligations coming due next year. De Leon also said Manila will have smaller programme loans from multilateral agencies next year. 

The central bank's foreign reserves hit a record high of $81 billion in August, partly due to strong remittances from Filipinos overseas and the BSP's open-market dollar purchases to slow the peso's appreciation.  

Monetary policymakers have suggested the Finance Department buy dollars from the central bank instead of issuing debt overseas to meet foreign obligations. Such a move would help dampen the strong peso, which has gained 5.4 percent this year and been the second best performing emerging Asian currency after the Singapore dollar. 

The Philippines is seeking to cut its dependence on foreign borrowing by pursuing debt swaps and innovative deals such as local-denominated global bonds, a move that has been praised by credit-rating agencies. 

Manila has narrowed its public debt as a percentage of GDP to 57 percent from 79 percent in 2005. Its interest payments now account for around one-fifth of state spending, compared with close to one-third in 2005.