"We’re still evaluating long-term offers," Manila Water president Antonino Aquino told Dow Jones Newswires. "Hopefully, we can secure a loan by next quarter."

He said the company, which serves around five million customers in the Philippine capital, will be borrowing in local currency to minimize foreign exchange risk.

Nearly all of Manila Water’s P4 billion (.3 million) in long-term borrowings are denominated in US dollars.

Aquino said the loan will be Manila Water’s first long-term borrowing in pesos, since the maturity needed to match the gestation period of the company’s investments hasn’t been available locally in the past.

"We’re looking at a very long-term loan facility — likely seven to 10 years," he said.

Earlier this year, the government launched a peso debt swap that paved the way for the creation of benchmark three-, five- and seven-year treasury bonds.

National Treasurer Omar Cruz had said that the benchmark bond increased the daily trading volume, particularly for the seven-year paper, in the secondary market to around P400 million to P500 million from only P100 million previously. He added that spreads have also narrowed to around 1-1.5 basis point from 25 basis points previously, creating an environment conducive to corporate bond issuance.

Aquino said that aside from reducing foreign exchange risk, Manila Water also wants to take advantage of lower interest rates.

"Rate structures are fairly attractive now," he said.

Aquino said the loan will partly finance the laying of an additional 120 kilometers of pipeline in Manila Water’s expansion area to the east of the Philippine capital Manila.

The P20 billion, five-year expansion project has extended to this year an income tax holiday granted to Manila Water, that was originally set to expire last year.

The project will also by funded from internal revenue and from other external credit lines to be sourced later. (Dow Jones)