PHILIPPINES' ONGPIN OPTIMISTIC ON DEBT TALKS
Philippines finance minister Jaime
Ongpin said he was cautiously optimistic an accord on debt
rescheduling would be reached with commercial bank creditors,
as he prepared for the third week of talks starting Monday.
    "One can never be too optimistic, but I'm cautiously
optimistic that we can get an agreement....We think we're close
to a deal," Ongpin told Reuters by telephone.
    He said he had received a new proposal from the banks late
Friday and had spent the weekend evaluating it with other
members of the Philippine delegation.
    Ongpin declined to disclose details of the banks' new offer
and bankers also declined to be specific ahead of their next
meeting with Ongpin on Monday. But one senior banker said he
too was guardedly optimistic a deal could be struck, possibly
by the end of the week.
    Still at the heart of the talks is Ongpin's offer to pay
part of the country's interest bill in Philippine Investment
Notes, PINs, instead of cash. The bank creditors' advisory
committee led by Manufacturers Hanover Trust Co rejected the
concept as it was originally drafted, but the counter-proposal
made on Friday contains a revised version, bankers said.
    Manila, seeking to reschedule 9.4 billion dlrs of its total
debt of 27.2 billion, wants to pay the London Interbank Offered
Rate (LIBOR) in cash and a margin above LIBOR in PINs.
    These dollar-denominated notes would be sold by banks at a
discount to multi-national firms which would then convert them
at face value with the central bank, thus receiving subsidized
pesos for use in funding government-approved investments.
    Effectively foreign companies would be paying the interest
margin above LIBOR. The Philippines would conserve foreign
exchange and enjoy investment inflows, reducing marginally the
need to seek new bank loans.
    But the banks rejected the PINs proposal in its original
form, fearing regulatory and accounting problems.
    They were also reluctant to veer from the principle that
interest should be paid in cash not paper, fearing that other
debtor nations would emulate the idea, bankers said.
    Ongpin sweetened his original offer by guaranteeing that
his government would redeem the notes at 7/8 pct over LIBOR if
there was no buyer in the secondary market.
    Last week the banks came under pressure to accept this,
when senior U.S. Officials endorsed it as fully consistent with
Treasury Secretary James Baker's debt strategy.
    But banking sources said that the margin over LIBOR was
still a sticking point.
    After Venezuela clinched a revised rescheduling agreement
last month at 7/8 pct over LIBOR, some New York bankers
imediately claimed that 7/8 pct should be seen as a new
benchmark for a debtor that needs no new loans, is current on
interest and is repaying some principal.
    The Philippines meets the first two criteria but not the
third.
 REUTER
