The Philippine government has issued $1 billion worth of global peso notes, the proceeds of which will be used to buy back existing bonds in an effort to better manage its liabilities, the Investors Relations Office announced Thursday.
The government wants to buy back around $1.5 billion worth of bonds from holders.
Assuming that the government is able to sell all the global peso notes for $1 billion, it will need to raise $500 million more by other means so it can buy back all the bonds as planned.
To plug the gap, the government is considering buying $500 million from the Bangko Sentral ng Pilipinas, said an official privy on the matter.
The BSP, which manages about $82 billion in foreign exchange reserves, has offered to sell dollars to the government. It said the government could save much by buying dollars from the BSP instead of turning to foreign creditors.
The recently issued government bonds have a 10-year maturity. On the other hand, the bonds that the government intends to buy back are expected to fall due in less than 10 years, the source said.
The government, therefore, will be able to extend the average maturity of its liabilities with the buyback initiative.
Also, the government expected the bonds it issued to fetch interest rates lower than that of the debt notes it hoped to buy back. As a result, the repurchase will enable the government to generate savings.