The Republic of the Philippines issued a record $3.475bn of foreign currency bonds in 2003, to fund its own budget deficit and plug holes in the balance sheet of the state National Power Corp. Finance secretary Jose Camacho and national treasurer Sergio Edeza won plaudits from investment bankers for their smart and opportunistic funding policy — but both men resigned in November, Camacho saying he was exhausted with the job. Richard Morrow spoke toEdeza , who would like to become a consultant when he leaves his post at the end of January, about how the sovereign will fare without him.
How confident have investors been about the
Investors still find the Philippines a good and comfortable investment, despite the downgrade, political noise and recent events. This is also because we are accessible and open to them. We have done many roadshows in Europe, Asia, the US and even more recently in the Middle East. However, in an election year investors will tend to be more cautious. This is why we have prefunded our 2004 requirements by $1.05bn.
Most of your foreign currency fundraising has
been in dollars. Why?
The dollar market is the deepest. We were able to issue long maturities, something we have not done in yen, save for the Nexi guaranteed bond in 2001. The euro market not receptive enough for the Philippines to do a big 10 year issue. We have done a seven year euro issue, but this currency will, at best, be our second choice.
How has political uncertainty affected your
It has significantly affected Philippine bond prices. But this will not prevent us from accessing the market, at the right time. Price is the only question.
Do low bond fees jeopardise bookrunners’
We are certainly aware that low fees translate into poor support. That is why our decision for mandating is based on a matrix that includes execution capability, league table standing, relationship, market support, and investor familiarity, among other factors.
Also, even the best bookrunners submit low fees. Of course we are not going to ask them to increase their fees. They just have to prove that they will remain committed even at those levels.
What is your budget deficit and foreign
currency funding need in 2004?
We are looking at a Ps197bn ($3.6bn) deficit. Our foreign currency requirement is $1.8bn, and we have already raised $1.05bn.
Is a new international bond still possible in
the first quarter of 2004?
We are assessing market conditions. We are always opportunistic and quick in execution.
Is the domestic investor bid for government
The idea is to broaden our domestic investor base over time. The retail bond programme taps a broader range of retail investors. Eventually the Philippines will have a good domestic capital market with a mix of local and international bond investors.
What state affiliated borrowers have
international funding needs in 2004?
We do not have any large access to multilateral funding this year. Our programme is for only $400m. At the same time, we have no arrangements yet for any guarantee from any institution. Napocor and the Bangko Sentral ng Pilipinas will be the biggest borrowers in 2004.