Manila to conduct new bond swap when conditions right -Purisima

WASHINGTON, April 10 Thu Apr 10, 2014 2:42pm EDT

WASHINGTON, April 10 (Reuters) - The Philippines will conduct another foreign debt swap similar to one in January once market conditions are right, the country's finance minister said on Thursday.

"We just did one earlier this year, and as you know, the Philippines is always opportunistic and when market opportunity is there, we will do one," Finance Secretary Cesar Purisima told reporters on the sidelines of the IMF/World Bank meetings in Washington.

Purisima also said the Philippines was talking to the World Bank about issuing "catastrophe bonds" that would help it deal better with the effects of extreme weather events such as Super Typhoon Haiyan, which hit in November.

"Given that the Philippines is among the countries that are hit by typhoons on a regular basis and given as we're seeing across the globe the intensity and frequency of climate extremes  we're looking at new types of financial instruments that will help us better deal with the challenges of climate change," he said.

"For example, we are looking at catastrophe bonds that would have like an insurance component to it. We've been working with the World Bank on these products," Purisima said without elaborating.

Purisima complained that the credit rating agencies had lagged behind the market when it came to upgrading the Philippines.

"The market rate is three notches higher that our rating. We are probably the most under-rated country in the region if not the world. We are in constant discussion with them, but the important thing is that the market is allowing us to borrow at close to what Malaysia is borrowing, in fact our CDS (credit default swap) is tracking Malaysia so that we are rated by the market like an A credit," Purisima said.

Local media in the Philippines quoted National Treasurer Rosalia de Leon as saying last month that the Philippines may consider another bond swap in coming months after a successful $1-billion exchange in the international market in January.

De Leon was quoted in the Business Inquirer as saying that increasing yields of Treasury bills and bonds had raised the potential need for another initiative that would help sustain the government's declining debt burden.

In January, the Philippines raised $1.5 billion from what was its first global bond sale after more than a year of absence from the offshore debt market.

De Leon said then that only $500 million of the amount raised would be used to bridge the government's shortfall this year while $1 billion would go to buy back outstanding bonds.

The sovereign bonds were sold to yield 4.20 percent, lower than the indicative guidance of 4.50 percent.

The Southeast Asian economy is seeking to cut its dependence on foreign borrowing by pursuing debt buy backs and swaps, and innovative deals such as local currency-denominated global bonds, a move that has been praised by credit rating agencies.

Ratings agencies Fitch Ratings, Standard & Poor's and Moody's raised the Philippines to investment grade last year, citing among other factors the government's improving public finances. (Reporting by David Brunnstrom; Editing by Andrea Ricci)

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