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By Chino S. Leyco, Reporter
THE Philippines is expected to sell over a
billion dollar worth of debt-exchange warrants, which would allow
holders of government’s foreign-currency denominated debt
papers—also called ROP (Republic of the Philippines) bonds—to
convert these into peso-denominated IOUs in case of default.
With a minimum price of $7.5 each, debt-exchange
warrants that the country is planning to sell $1.5 billion to
holders of its foreign currency bonds.
Bids for the warrants are due Friday New York
time, and the price as well as the result of the auction will be
announced on Monday.
“Based on its current expected external
funding requirements, the Republic does not plan to announce further
issuance of warrants applicable to debt maturing before November 15,
2017,” the government said in a statement.
Credit Suisse is the sole warrant manager.
The move is part of the government’s general
liability management program. Proceeds from the sale of the warrants
will count as revenues for the government.
Finance Undersecretary Roberto B. Tan earlier
said this will help local banks holding ROP bonds to avoid
additional charges based on risk weights set by international
banking standards under Basel 2.
Certain provisions of Basel 2, which was
implemented in July last year, were gradually incorporated into the
current risk-based capital adequacy framework the Bangko Sentral ng
Pilipinas (BSP) imposes on local lenders. These would include giving
lower risk weights for highly-rated corporate exposures, giving
higher risk weights for past due claims, adopting the standardized
approach for investments in securitization structures, implementing
a standard computation of liquidity risk and interest rate risk, and
issuing broad guidelines on operational risk management.
In a related development, the BSP has approved
the exemption of transactions involving the ROP warrants from
licensing requirements.
The Monetary Board, the policy making body of
the BSP, said this is to encourage maximum participation of the
banking industry in the government’s paired warrants program.
It also said banks’ holdings of the warrants
booked in the held-for-trading category are also exempted from
capital charge for market risk as long as the instrument is paired
with ROP Global Bonds, up to a maximum of 50 percent of the total
qualifying capital.
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