PHL govt launches P100-B debt swap program

The Philippine government on Tuesday launched its planned debt swap program with a minimum issue of P100 billion worth of 10.5- and 20-year bonds, according to First Metro Investment Corp. (FMIC) said. FMIC president Roberto Juanchito Dispo said the minimum coupon rate has been set at 6.375 percent for the 10.5-year bonds maturing in January 2022, and 8 percent for the 20-year bonds payable by July 2031. With six other banks, FMIC was hired by the Department of Finance and the Bureau of the Treasury (BTr) to arrange government's domestic debt consolidation program. The original government plan was to launch the debt swap on June 28, but requisite approvals were not met in time. A P50-billion minimum will be offered for each tenor before the offer period expires July 13, Dispo said. The BTr will make the awards and set the final price July 15, before the transactions are settled on July 19. All bonds due from July 2011 to April 2021 and from March 2022 to January 2031 are eligible for the swap, Dispo said. The total size of the eligible bonds could run up to P1.9 trillion, he added. Demand to exceed P199B Demand for the new bonds could exceed the P199 billion registered in a similar debt exchange transaction in December, Dispo said. The demand so far received by FMIC alone has already hit P60 billion, the FMIC executive said. Unlike in previous transactions, no new money is involved in this month’s debt swap, Dispo clarified. "Only investors with existing bonds can participate," he said. The latest debt swap program is part of government’s efforts to consolidate its debt and lengthen the debt profile. "This is part of… government's fiscal consolidation program and to extend the average maturing of the country's obligations," said National Treasurer Roberto Tan during the program's launch. Land Bank of the Philippines and Development Bank of the Philippines — both state-owned institutions — were also hired by government to arrange the transaction. It also appointed four private banks — FMIC, BPI Capital Corp., SB Capital Investment Corp. and Citibank — as joint issue arrangers. With the debt swap proceeds, government is looking to finance its budget deficit programmed at P290 billion this year, or 3.2 percent of the gross domestic product. —JMT/VS, GMA News