Manila, July 10, 2003 By Des Ferriols (Star) Despite the prevailing volatility in the global bond market, the Philippines was able to raise $750 million from its global bond offer, generating enough funds to bankroll the funding requirement of state-run National Power Corp. after the companyís own bond sale failed.

The bond, set to mature in 2014, sold at a spread of 461 basis points over comparable US Treasuries. It had a coupon rate of 8.25 percent, a price of 99.138 and a yield of 8.375 percent.

The issue, which was originally targeted to raise $500 million, was increased in size after the offering attracted orders worth $3 billion.

"Itís always a good strategy to leave enough appetite in the market," Finance Secretary Jose Isidro Camacho said yesterday. "It was good enough that we were able to raise more than we originally hoped to raise,"he added.

Camacho also said the government will lend the proceeds of the $750-million bond sale to Napocor.

"We expect that this financing, which will be on-lend to the Napacor, will fulfill all its commercial funding requirements for 2003," he said.

The DOF chief said the success of the bond offer came at a time when the global bond market was very volatile, indicating that there was a substantial appetite in the market for Philippine bonds.

"To be able to pull this off at a time when the market is this volatile, that is an achievement in itself," Camacho said. "Now, we will enjoy even greater flexibility in our fiscal position."

Camacho pointed out the government has already reduced its foreign borrowing for the remainder of the year after the success of its retail Treasury bond (RTB) offer which generated P74.318 billion.

The government had originally planned to raise $900 million from foreign borrowings but this was subsequently reduced to only $400 million after the RTB offer.

"The rest of the year doesnít look as daunting anymore," Camacho said, adding that the government is not making specific plans to pre-fund its 2004 requirements.

According to Camacho, the finance department was satisfied with the spread on the 10.5-year global bonds, considering that it was a long-term instrument and a new issue.

"When you look at the spreads, you have to consider that this is a long-tenor instrument and that alone saved us about 20 basis points plus the new-issue premium," Camacho explained. "When you take that into consideration, you can extrapolate that the spreads are reasonable," he added.

The DOF had appointed Citigroup, Deutsche Bank Securities and JPMorgan Chase to manage the bond sale.

Meanwhile, Napocor still has to complete its two pending transactions with the Asian Development Bank (ADB) and the US Overseas Public Investment Corp. (OPIC).

Camacho earlier said these transactions could still push through depending on the outcome of the negotiations with Napocor.

Napocor originally planned to go to the bond market itself but weak demand forced the government to borrow the money on behalf of the power firm.

Reported by: Sol Jose Vanzi

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