The International Finance Corp. (IFC), the private investment arm of the World Bank, will issue peso-denominated bonds of up to P7 billion for its own funding purposes as soon as market conditions proved ripe for it.
IFC resident representative Jesse Ang said they are always ready to tap markets for local currency bonds. “We always have an interest to do that but we also have to make sure conditions are ripe to do it. We can do any amount but normally we do P3 billion to P7 billion and this is capital to finance our projects,” he said in an interview.
IFC had planned to raise P5 billion peso-denominated bonds in 2007 but it was postponed because of taxation issues since as part of the World Bank, IFC have had to verify its tax-exempt status.
IFC argued at the time that since Asian Development Bank’s own bond issues were tax free so should the World Bank unit. ADB in 2007 issued P5 billion local currency notes.
Ang said the taxation concerns have been resolved. “It took some years to resolve the taxation issue and then by the time it was resolved, it was not the right condition to issue the bonds.”
“We have a target,” he explained. “We always have to compare currencies to the dollar benchmark and if you compare the peso to the dollar now, the peso has been appreciating so if you borrow now it is expensive (in peso) and the interest rates are high on the dollar. At this point, I would say we are always ready to issue peso-denominated bonds when the conditions have been met.”
IFC’s main instrument is US dollar bonds but they have plans of doing more local currency issues. It recently issued $50 million worth of renminbi-denominated bonds under its short-term debt program called the Global Discount Note Program.
“We haven’t done peso since the 1990s but yes, we’re still interested,” said Ang.
The last time IFC issued a peso bond was in 1997 in the amount of P2.6 billion under the IFC’s Global Medium Term Note program. This transaction, IFC’s debut Philippine peso issue, was also the first euro-peso issue launched in the international capital markets.
IFC helps developing countries in financing investments, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. Based on its website in 2012, IFC investments peaked at a record high of $20 billion.
In the Philippines, IFC’s focus is mainly on lending to underfinanced sectors such as renewable energy, energy efficiency, and climate change. Across the region, it has investments of $2.9 billion at the end of 2012.