RP prepays $1.415-B foreign debt in 7 mos
Des Ferriols
Philippine Star
Despite the depreciation of the peso against the dollar, both the public and private sector still found it cheaper to prepay their foreign obligations with total prepayments reaching $1.415 billion in the first seven months of the year.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that prepayments rose 8.5 percent in January to July from $1.304 billion as of end-June this year.
BSP Governor Amando M. Tetangco Jr. said the public sector alone prepaid about $7.5 million worth of debt, with its total prepayment amounting to $455.6 million at the end of July.
Private prepayments, on the other hand, rose to $959.6 million, up $103.3 million from $856.3 million at the end of June.
This year’s prepayments lagged behind last year’s total which was recorded at $1.7 billion.
Tetangco explained that this could also be due to the fact that the number of obligations that could still be prepaid is already declining.
Tetangco said the BSP did not expect prepayments to be as large as last year, however, saying that aside from the change in the position of the peso against the dollar and other currencies, public and private loan portfolios have begun to shift.
“There is only so much foreign obligations that either the public or the private sector can prepay,” Tetangco said. “Eventually that will taper off. But they’re still doing it so there must be some left-over, just not as much as before.”
The bulk of this year’s prepayments so far came from the transaction recorded in May this year when the BSP approved the pre-payment plan of the state-owned National Power Corp. (Napocor) that would settle $260.2-million worth of yen-denominated foreign obligations in June.
Officials said the prepayment would settle various financial obligations guaranteed by the Japan Bank for International Cooperation (JBIC) amounting to ¥27.2 billion or $260.2 million.
The June prepayment was the first for Napocor whose debt was estimated by the Power Sector Assets and Liabilities Management Corp. (PSALM) to amount to a total of $18 billion including $7.17 billion worth of outstanding loans and $11 billion worth of long-term obligations to independent power producers.
PSALM said that to some degree, Napocor’s debts were being pared down by the appreciation of the peso against the dollar especially since is planning to borrow in order to pay debts owed by its sister company, the National Transmission Co. (TransCo).
Napocor was planning to pay about P5.29 billion in TransCo-related debts this year and officials said they might have to borrow up to $777 million to be able to do so.
Both PSALM and Napocor officials said the proceeds from the sale of their assets would not be enough to cover Napocor’s debts which would make it necessary to consider other options such as swaps and options.
Napocor data indicated that 92 percent of its debts were dominated in foreign currencies and PSALM had been targeting to lower this proportion to 61 percent, at least.
The prepayment of foreign debts was historically brisk last year as the peso surged against the dollar, making it possible for Philippine companies and the government to prepay a significant portion of their foreign obligations.
The strength of the peso allowed both the public and the private sector to prepay $3 billion worth of foreign debt in 2007, the BSP said, adding that this was the highest prepayment level since the peso began its often rapid depreciation after the Asian crisis.
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