BANKS TO MULL PHILIPPINE DEBT PROPOSAL
The Philippines' bank advisory
committee meets tomorrow to discuss its response to a novel
proposal by finance minister Jaime Ongpin to pay part of the
country's interest bill with investment notes instead of cash,
bankers said.
    Ongpin outlined his plan today to the 12-bank advisory
committee headed by Manufacturers Hanover Trust Co.
    Bankers declined to comment on today's meeting but said the
panel's response could be crucial to the fate of the talks,
which are now in their second week. "The ball's in our court
now," one banker on the committee said.
    Under Ongpin's rescheduling plan, the Philippines would
offer to make interest payments in cash at 5/8 pct over the
London Interbank Offered Rate.
    Banks which found this rate unacceptably low would be
offered an alternative of LIBOR payments in cash plus a margin
of one pct in the form of Philippine Investment Notes, PINs,
bankers explained.
    These tradable, dollar-denominated zero-coupon notes would
have a maturity of six years, but they would be redeemable at
any time at par for pesos to fund investments approved as part
of the government's debt-equity scheme.
    Because banks would be able to sell the PINs to
multinational investors at relatively small discounts to face
value, their total yield would be boosted well above the 5/8
pct cash margin, according to the Philippine proposal.
    Although bankers are eager to foster foreign investment in
the Philippines, the PINs idea is likely to run into stiff
resistance by at least some members of the bank advisory
committee because it would establish the precedent of some
interest payments being made with paper rather than cash.
    Ongpin has said that U.S. regulators and accountants had
given a green light to his idea, but bankers are not so sure.
    U.S. bankers fear that they would not be able to account
for the notes in the same way as accruing cash interest
payments and that their profits would suffer accordingly.
    If the banks reject the proposal out of hand, however, they
run the risk of scuttling the talks, for Ongpin has insisted
that he would not accept a margin above 5/8 pct.
    The Phillipines is asking the banks to reschedule 3.6
billion dlrs of debt falling due between 1987 and 1992 and to
grant easier terms on 5.8 billion dlrs of previously
restructured debt.
 Reuter
