A debt swap plan for at least P100 billion of government debt proposed by the First Metro Investments Corp. (FMIC) is likely to be implemented by the third quarter of the year as FMIC pursues to firm up talks with the Treasury department.
“We have a meeting with the [National] Treasurer [Roberto Tan] on May 10 to discuss the terms and conditions of our proposal to implement a debt swap this year. Hopefully, [we can implement it]by the third quarter this year,” Roberto Juanchito T. Dispo, president of FMIC, told reporters on the sidelines of the Asia Finance Summit on Tuesday.
This is in light of the government being inactive in issuing big chunks of bonds and taking advantage of the low-interest rate climate. FMIC has been proposing a debt swap program for P100 billion to P200 billion to the government to replace and/or consolidate its “all-of-the-run” benchmark bonds.
Dispo said a jumbo sized debt swap will enable the government to get rid of several interest rates and higher monthly payment from existing multiple bonds through issuance of P100-billion to P200-billion bonds with a tenor of 10 years to 15 years to pay off all the original benchmark bonds.
“We will emphasize the importance of speeding up the implementation of the debt consolidation program considering that the benchmark of government securities is now losing its effectiveness in a sense that benchmark bonds now are unpopulated by fresh issuances by the national government,” Dispo said.
“The volume of fixed income now hovers around P4 billion to P5 billion a day only. This is pathetically low because the FPD trading volume of P8 billion to P9 billion is even higher,” he added.
He said the debt swap program is needed to be implemented as soon as possible to stop the “rise in distortion of Philippine government securities”, to provide fresh sources of benchmark bonds that will aid the currently “illiquid market.”
Dispo earlier said the debt swap would be implemented by FMIC and “other big banks.”
FMIC was also the investment bank behind last year’s P140-billion worth of domestic bond swap in August, which had a maturity of 10 years.
The Philippines conducted its last domestic bond swap in August last year when it sold P140 billion worth of 10-year bonds.