P50-B NDC bond float gets rapid BSP okay

10/16/2009

The policy-making Monetary Board of the Bangko Sentral ng Pilipinas (BSP) acted with dispatch in approving yesterday a plan for the National Development Co. (NDC) to issue up to P50 billion in so-called reconstruction bonds to fund primarily rehabilitation efforts for victims of two successive typhoons that hit the country.

An approval from the BSP is required before the government can float the bond.

Trade and Industry Secretary Peter Favila said the bonds will likely have terms of five to 10 years but the government has yet to decide the tranches for the bond issue.

“NDC will be the issuing entity backed up by a guarantee from the national government. There is interest in the bonds, financial institutions also want to help in rehabilitating calamity-affected areas,” he said.

The government hopes to sell the bonds in the next few weeks, he said.

Finance Secretary Margarito Teves said the government has to identify projects that need financing prior to the bond sale.

Two typhoons in two weeks destroyed about P18.4 billion in crops and fisheries and around P5 billion worth of infrastructure in northern Luzon and Metro Manila.

President Arroyo said the government may raise funds through the offer of NDC bonds, foreign aid and grants and cheap loans from development lenders to finance the rebuilding of typhoon-hit provinces in the north, including the country’s main rice-producing areas.

Arroyo said the reconstruction bond would be offered mainly to multilateral institutions, including the World Bank and the Asian Development Bank.

Favila said the NDC needs to amend Executive Order 824 that allows NDC to issue the bond signed last Aug. 6 since the P50-billion NDC fund was originally set aside as government’s counterpart to the private sector proposal for a P100-billion special public-private sector economic stimulus package following the global financial crisis.

EO 824 was also originally designed for specific priority infrastructure projects identified by the government.

“We are just ironing out the legal issue as we have to amend the EO. But we hope to complete this on Friday for signing by the President,” Favila said.

The reconstruction bond would have tenure of five and 10 years at market rates with a small premium to investors.

Favila said the originally planned P50-billion bond float by the NDC was hardly tapped by the private sector as the project proponents themselves have decided to fund the infrastructure projects that were identified for funding by the proceeds of the NDC bond float, thus the decision to tap the entire P50 billion for the reconstruction projects of the government.

“But that was hardly tapped by the private sector, so we have to use this opportunity. We have to issue the entire P50 billion this time instead of in tranches,” Favila explained.

NDC was supposed to issue the bonds in tranches depending on the projects that have been approved by an evaluation committee.

The objective is to help spur the economy in light of the global economic slowdown through massive infrastructure development projects.

The infrastructure projects are long-term ones and are expected to go beyond the current administration.

Favila said that government financial institutions such as Land Bank of the Philippines, Development Bank of the Philippines, Social Security System, and Government Service Insurance System are also expected to subscribe to the “reconstruction bond” float. Ayen Infante

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