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THE
government has thrown an appetizer for current holders
of its foreign currency-denominated bonds, mostly in US
dollars and Japanese yen, potentially making them more
attractive than the returns the IOUs represent.
In a
statement, Finance Secretary Margarito Teves said they
will issue warrants to all who have invested in its debt
papers, often referred to as ROPs, market shorthand for
the Republic of the Philippines.
Under
the plan, holders of foreign-currency ROPs may exchange
their exposure for peso-denominated bonds in the remote
event the government defaults on its obligations.
“The
warrants, which will be sold to investors via a Dutch
auction in early 2008, will expire after a defined
number of years,” Teves said.
A Dutch
auction permits a gradual reduction in the price of the
item to be sold to a point where it actually gets sold.
It
contrasts sharply with the double-sided auction system
best exemplified by stock exchanges such as the
Philippine Stock Exchange.
Treasury
officer-in-charge and Finance Undersecretary Roberto Tan
said the planned warrants program forms part of the
government’s “general liability management program.”
“Even as
our improving fiscal situation is reducing our issuance
of bonds in foreign currency, we are interested in
supporting Philippine bank demand for these instruments.
“Such
demand keeps the Philippine yield curve low, which helps
lower the cost of capital for the entire economy,
especially the long-term borrowers,” Tan said.
Proceeds
from the warrants will form part of the revenue flows
expected this year, Tan said. |
