Wednesday, May 23, 2012

Gov't eyes P30 B from PSALM bond issuance

MANILA, Philippines - The government is aiming to tap the cash-rich domestic market by mid-June for up to P30 billion in 10-year bonds for the Power Sector Assets and Liabilities Management Corp. (PSALM), the state agency tasked to manage and dispose the government’s power assets, officials said yesterday. Finance Undersecretary Rosalia de Leon told The STAR yesterday that the government is considering borrowing an initial tranche of PSALM’s estimated P85-billion funding requirement through the issuance of bonds and continue with the second tranche in the latter part of the year. “We will do an initial tranche. The full amount they’re requiring is P75 billion to P85 billion,” she said. The rest of the amount would be raised in the latter part of the year, she said. Government financial institutions such as the Land Bank of the Philippines and the Development Bank of the Philippines may handle the debt sale, De Leon added. “We are already in talks with the GFIs,” she said. National Treasurer Roberto Tan said the Bureau of the Treasury may adjust its regular borrowing correspondingly so as not to compete with the PSALM issuance. “We have to differentiate it so it will be different from what will be issued by PSALM,” said Tan as he confirmed that the government is already preparing the bond issuance for PSALM. The government would do away with the usual practice and borrow on behalf of PSALM instead of the agency doing the fund-raising activity. “(Borrowing by the) national government is the cheapest,” Tan said. Estimates made by the Department of Finance (DOF) showed that the financing cost of government is 50 basis points lower than the borrowing cost of state agencies. Early last year, PSALM has obtained P75 billion in syndicated term loan to meets its funding requirements. The government has a program to borrow $4.02 billion from foreign sources this year, lower than the programmed $4.5 billion in 2011, according to the latest data from the Department of Finance (DOF). Of the $4.02 billion, the government plans to borrow $2.25 billion from the commercial debt market and to borrow $1.77 billion worth of program and project loans. The 2012 borrowing program has a proposed mix of 75 percent and 25 percent, in favor of domestic sources. The government borrows from the local and overseas debt market to plug its budget deficit, which is projected to hit roughly 2.6 percent of gross domestic product (GDP) this year. Last year’s budget gap reached P197 billion, below the programmed ceiling of P300 billion set for last year. - By Iris C. Gonzales