There will be a three-day auction for the Philippine debt-exchange warrants, which will begin today (Feb. 20) until Friday (Feb. 22). The governement set a minimum price of US$7.50 each for paired warrants to be sold at auction. Credit Suisse is tapped as the sole warrant manager.
These paired warrants will allow holders of Philippine sovereign debts the option to convert, in case of a default, to peso-denominated Treasury bonds. Although, the paired warrants also offer insurance-like protection to bondholders; however, it is different to credit default swaps (CDS) as the latter settles in cash while the paired warrant gives peso bonds in exchange.
The sweeteners given by the Philippine government to its foreign currency bonds will definitely make the bonds more attractive to investors as paired warrants carry zero risk weigthing for capital adequacy purposes.
Eligible for the warrants program are holders of dollar-denominated ROPs maturing this year until 2011 and those that will fall due from 2013 to 2017; and euro-denominated sovereign debt papers due on 2010 and 2016.
The result of the auction will be announced on February 25.
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