By Iris C. Gonzales (The Philippine Star) Updated October 22, 2009 12:00 AM
MANILA, Philippines - The Department of Finance (DOF) is looking into the proposal of state-run Home Guaranty Corp. (HGC) to issue P5.5 billion in 10-year bonds in the fourth quarter of the year or early 2010, Finance Undersecretary Jeremias Paul Jr. said yesterday.
Paul said now is the best time for the government or a state-owned agency to borrow because of strong liquidity in the market. However, Paul said that even if market conditions are ripe for a bond sale at this time, the DOF has yet to assess whether HGC needs it at this time.
“The best time to borrow is now but do they need it now,” said Paul.
HGC is seeking the approval of the DOF for the planned bond sale.
HGC president Gonzalo Bongolan nonetheless hopes that the Finance department would give its greenlight to the planned bond sale as proceeds would cover the agency’s P3.5 billion unpaid obligations to the Social Security System (SSS) while the rest would be used for its operations.
The agency earlier targeted a second quarter issuance but Bongolan said HGC still has to wait for regulatory approvals from the Bangko Sentral ng Pilipinas (BSP) and the DOF.
Analysts said investors are now looking for safe havens where they can park their funds following the global financial crisis last year.
HGC is a government-owned and controlled corporation mandated by law to extend guarantee cover to all bond issuances of other state-run firms.
The last time the HGC operated with no unpaid guarantees was in the middle 90s before the Asian financial crisis hit the country.
Nonetheless, Bongolan said that from a P16 billion total obligations in 2001, the agency was able to trim it to just P3.5 billion.
The HGC bonds are expected to have a rate of 0.9 percent of the yield fetched for the benchmark 10-year bonds being auctioned by the Bureau of the Treasury (BTr).
Bongolan said the bonds would also have the usual “sweeteners” such as the guarantee cover of the government and that it would be tax-free unlike the regular debt papers issued by the BTr.
If this pushes through, this would be HGC’s fourth bond sale since 2002 where it floated P7 billion worth of debt papers.
In 2004 and 2006, the HGC sold P3 billion and P12 billion worth of bonds, respectively.
If on the other hand, HGC won’t be able to raise funds through the bond sale this year, it would be under heavy pressure to provide guarantee services to home buyers.
Aside from HGC, the state-owned Pag-IBIG Fund also plans to issue P12.5 billion worth of bonds.
The National Food Authority (NFA), the state grains agency, is also scheduled to sell P5.5 billion in 10-year bonds next week.
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