$500-million Samurai bonds set in February

MANILA, Philippines - The Philippines will issue samurai bonds worth around $500 million in the third week of February to finance a record budget deficit this year, Finance Secretary Margarito Teves said yesterday.

“We will issue it on the third week of February,” Teves told reporters. “Right now, we are looking at $500 million only but our MOA allows us to tap up to $1 billion.”

A roadshow to offer the samurai bonds - yen bond issues in Japan by non-Japanese entities - will be held in the first week of February.

The bonds would likely have a maturity of more than five years, National Treasurer Roberto Tan said.

A successful Samurai bond sale will nearly complete government’s planned foreign debt issues of $2.5 billion this year.

The government needs to fund a projected budget shortfall of P293 billion, or 3.5 percent of GDP in 2010 and refinance maturing debt.

Meanwhile, the Philippines and the Japan Bank for International Cooperation (JBIC) are already firming up a guarantee agreement next month for the proposed Samurai bonds.

Once the government and JBIC sign the guarantee agreement, Teves said the Philippines can proceed with the bond sale, proceeds of which would be used to plug its budget gap.

Tan said the government is considering selling the bonds via a private placement which would cater mostly to institutional investors.

“We’re targeting insurance companies and pension funds,” Tan said.

A private placement is a direct offering of securities to certain investors while a public offering of bonds would entail a lot of documentary and disclosure requirements. It usually caters to retail investors.

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.

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 Japanese ¥50 billion.

Early this month, the government sold $1.5 billion in dollar-denominated bonds, making it the first Asian sovereign debt issuer for 2010.

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