PHILIPPINE DEBT TALKS PROCEED WITH NARROWER FOCUS
The latest round of talks between
Philippine officials and the country's commercial bank
creditors on the rescheduling of 9.4 billion dlrs worth of debt
are still proceeding, but with a narrower focus, Philippine
Finance Secretary Jaime Ongpin said.
    He told a press briefing Wednesday that Manila has dropped
a two-tier interest payment offer, which would have given banks
a higher return if they took partial payment in new Philippine
investment notes (PINs) instead of in cash.
    "The PINs proposal has been laid aside.... The discussion is
now on pricing (of just the cash payments)," he said.
    Foreign banking sources in Manila said on Tuesday that the
Philippines had raised its basic interest rate offer to 7/8
over the London interbank offered rate (LIBOR) but Ongpin would
not discuss details of the pricing negotiations.
    He also refused to speculate on when an overall agreement
might be reached. The talks have been going on for more than
three weeks.
    Manila originally offered to pay interest in cash at 5/8
over LIBOR or in a mixture of cash and PINs -- tradeable,
dollar-denominated, zero coupon notes that could potentially
yield up to one point over LIBOR.
    The PINs option was subsequently modified to guarantee at
least a 7/8 point spread over LIBOR but many bankers still had
grave reservations, seeing it as a possible precedent for other
large debtors to avoid paying interest in cash.
    The PINs proposal has now been left on the table as a
separate option for those banks, which might want to fund their
own investments in the Philippines or sell the notes in the
secondary market, Ongpin said.
    Under Manila's plan, the PINs would be redeemable at full
face value in Philippine pesos to fund local equity investments
at any time prior to their six-year maturity date.
    While the commercial banks had their doubts about the PINs
proposal, Ongpin said there was great interest on the part of
certain investment banks which are already active in the
secondary market for sovereign debt.
    Unlike current debt/equity schemes, Ongpin said, the PINs
would include no government fees and would be free from
"administrative hassles."
    He said about six investment banks had been approached and
four had replied so far. One even showed interest in buying 45
mln dlrs worth of notes, he said.
    Ongpin said that by funding current interest payments in
the secondary market through the PINs scheme, the Philippines
could conserve at least one to 1.5 billion dlrs of foreign
exchange reserves during its planned seven-year restructuring
period.
 REUTER
