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The government has issued debt exchange warrants as
guarantee to investors in the event of default in some of its
international bonds.
The warrants will 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.
In a statement, the Bureau of
Treasury said it issued $2.25-billion warrants in a Dutch auction as
part of the government’s general liability management program.
Proceeds from the sale of the
warrants will count as revenues for the government.
This will also help local banks
holding ROP bonds to avoid additional charges based on risk weights
set by international banking standards under Basel 2.
Warrants ensure that ROP holders
will get back their investments in case the national government runs
out of dollars to pay up its obligations.
During the auction, the
government received bids of $2.90 billion.
More than 90 percent of the
warrants were allocated onshore, with the rest going to offshore
participants.
All orders at or above the
clearing price were scaled back by approximately 3 percent in pro
rata basis.
The warrants are expected to be
settled on June 6 this year. Credit Suisse has arranged the sale of
the financial instrument.
Currently, the government has set
a borrowing mix in favor of domestic sources at 70 percent or P240.7
billion. Foreign sources accounted for 30 percent amounting to
P105.4 billion.
The government had already
borrowed $500 million through the sale abroad of sovereign bonds, or
IOUs, in January,
--Maricel E. Burgonio
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