Gov’t to offer P100B long-term bonds for swap initiative

MANILA, Philippines—The government is eyeing the issuance next month of as much as P100 billion in fresh long-term bonds for its bond exchange initiative.

Under the initiative, which the Bureau of the Treasury calls the “Debt Consolidation program,” the government offers new bonds to be exchanged with those that are already about to mature.

The objective is to extend the average maturity of its debts, and to provide an alternative investment opportunity for those who want to lock in their money further for the longer term.

The announcement was made by First Metro Investments Corp. (FMIC), one of the banks tapped by the treasury bureau to arrange the debt exchange, which said the program would be launched on July 5, with the swap offering expected to run until mid-July.

Juanchito Dispo, president of FMIC, said in a press conference on Wednesday that the government has been looking at issuing between P40 billion and P50 billion worth of new 10.5-year bonds, and another P40 billion to P50 billion worth of new 20-year bonds to be exchanged with existing bonds that would soon mature.

“The government is looking at doubling last year’s volume,” Dispo said.

In the 2010 bond exchange, the government swapped P20 billion worth of new 10-year bonds, and P20 billion of new 25-year bonds.

Finance Secretary Cesar Purisima earlier said the government would regularly look at opportunities for bond swap, explaining that extension of average maturities of the state’s liabilities has become one of its priority measures for debt management.

National Treasurer Roberto Tan said on Tuesday that the Bangko Sentral ng Pilipinas has already given a favorable opinion to the planned bond exchange, although his office was still awaiting this favorable regulatory statement to be formalized, as of Wednesday.

The government also has to seek the approval of the Office of the President and the Securities and Exchange Commission.

Dispo said formal go signals from the regulatory bodies and the Office of the President would likely be secured by the Bureau of the Treasury before the target date for the launch on July 5.

He said the domestic bond market would have sufficient demand for the new bonds to be offered for exchange.

“In my opinion, the volume from last year’s bond exchange may be easily exceeded,” Dispo said.

He said the other banks working with FMIC on the government’s Debt Consolidation Program included the Land Bank of the Philippines, Development Bank of the Philippines, Bank of the Philippines Islands, Security Bank and Citibank.