Bulk of 2015 foreign borrowings earmarked for loan refinancing

MANILA, Philippines—The government will continue to rely on cheap cash currently flooding the economy to cover funding gaps for next year’s budget, with plans to borrow overseas to focus mainly on restructuring old obligations.

Next year’s borrowing plan was recently approved by the central bank’s Monetary Board (MB), and the focus would be on replacing old debt paper with new ones on better terms.

This comes as the government prepares for the sale of $1 billion worth of sovereign bonds, also known as Republic of the Philippines (ROPs), by the first quarter of next year.

“They could go higher provided it’s for refinancing old debt,” said Felipe Medalla, a member of the Bangko Sentral ng Pilipinas (BSP). “They could go for $2 billion or even $3 billion, as long as it’s for refinancing.”

According to Medalla, the MB’s approval is for ROP issuance that prioritizes restructuring of old loans. The MB manages the flow of dollars and other currencies in and out of the country.

He said the government was allowed to borrow only $500 million to $750 million for budget deficit funding for next year. “The timing is left to the (Treasury) but most likely they’ll do it in the first quarter of next year,” he said.

Earlier this year, the government issued $1.5 billion in long-term ROPs, with the bulk of which used to replace existing obligations at lower rates. This was part of the Aquino administration’s aggressive liability management program that seeks to improve the country’s finances.

National Treasurer Rosalia de Leon last week said the Treasury was planning to get about 14 percent of next year’s borrowing needs from foreign sources. About $750 million would come from overseas investors, while the remaining $1.25 billion would be in the form of overseas development assistance (ODA) funds.

In the meantime, the International Financing Review (IFR) earlier reported that the Philippine government hired Deutsche Bank and HSBC as joint global coordinators for an ROP issuance.

The two banks will also be joint bookrunners alongside Citigroup, Credit Suisse, Goldman Sachs, JP Morgan, Morgan Stanley, Standard Chartered and UBS.—Paolo G. Montecillo