Amadeusz Juskowiak

Manila said to offer debt bonds to banks

The Philippines will offer its commercial bank creditors an innovative pricing plan that will make debt payments through certificates of indebtedness as an alternative to cash the authoritative Business Day newspaper said

Finance Secretary Jaime Ongpin told reporters yesterday the alternative proposal is designed to avoid an impasse when debt rescheduling talks reopen in New York on Tuesday

He did not give details but said It is a very useful alternative and in the end will permit the banks to say that they achieved their pricing target and will likewise permit the Philippines to say exactly the same thing

Quoting negotiation documents to be presented to the countrys 12bank advisory committee Business Day said the debt certificates will carry maturities of five or six years

It said the certificates will be classified as zerocoupon bonds or promissory notes with no interest but priced at a considerable discount from their redemption price

It said the debt bonds will entitle holder banks to a guaranteed return on both interest and principal since no payment of any kind is made until the bond matures

It said a bank can sell the bonds on the secondary bond market for either dlrs or pesos depending on its requirement

The documents said peso proceeds can be invested in selected industries under the Philippines debtequity program

Ongpin said Manila is sticking to its demand of a spread of 58 percentage points over London Interbank Offered Rates LIBOR for restructuring 36 billion dlrs of debt repayments

The proposal will give the banks a choice of 58ths or the alternative Ongpin said Our representatives have gone to Washington to the International Monetary Fund the World Bank the Fed Federal Reserve Board and the US Treasury to brief them in advance on this alternative and it has generally been positively received

We dont believe that there is going to be a problem on the accounting side Ongpin said We have run this alternative proposal to the accounting firms Neither have the government regulators indicated that there will be a problem