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Citibank, Deutsche Bank to sell new peso bonds


The Philippine government hired New York-based Citibank and the German financial services giant Deutsche Bank to sell its peso-denominated bond offering. Philippine authorities also engaged the services of Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs (Asia), HSBC, and JP Morgan as joint book runners for the bond sale that was designed as a peso loan to keep the transaction safe from the risks of foreign exchange fluctuations in the market. Money from the bond sale will be used to finance infrastructure projects and fill Philippines' P325-billion budget deficit. Finance Secretary Cesar V. Purisima told reporters Thursday the government expected to sell at least $500 million of the 10-year bonds. The Singapore unit of global credit rating firm Moody’s Investor Service gave the global peso bonds a Ba3 rating, citing the country’s resilient external sector and the stability of its financial system. Rival Standard and Poor’s Singapore unit gave the global bonds a BB- (BB minus) based on the Philippines' steady economic growth the past 10 years. “The Philippines’ record of steady growth is a rating support. Over the past decade, real GDP growth averaged 4.9 percent without significant fluctuation. This is despite ongoing political volatility and numerous institutional and structural impediments," S&P lead analyst Agost Bernard said Thursday. “Short-term liquidity risk for the Philippines is therefore moderate, in our view, compared to that of its similarly rated peers," Bernard said. Positive developments in the external sector and a stable financial system will be counterbalanced by “structural weaknesses in government finances and a public-sector debt overhang larger than the country’s rating peers," Moody’s lead analyst Tom Byrne warned, however. “Moody’s sovereign bond methodology characterizes the Philippines as having low economic strength, reflecting low per capita GDP, a very low level of investment, and a narrow export sector," he said. “Government financial strength is also low, but institutional strength is moderate and event risk is low. Nonetheless, despite considerable political uncertainties in the past decade, the functioning of the country’s economic institutions has never become destabilized," Moody’s analyst and assistant vice president Christian de Guzman said. De Guzman cited the country’s strong external payments position, boosted by foreign exchange transferred by millions of overseas Filipino workers, and credited the authorities for not taking exceptional measures in the banking sector even at the height of the global financial crisis. Despite the performance of the fiscal sector, De Guzman said he was optimistic that the Philippines economic performance “will support a rebound in revenue performance," noting that the “pressure on the finance-ability of the government’s larger deficit has been alleviated by ample liquidity in the domestic market and its access to the global bond market." —VS, GMANews.TV

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