Pag-IBIG raises P2b from 5-year bond flotation
26th July 2007
By Eileen A. Mencias / Manila standard
Home Development Mutual Fund, better known as the Pag-Ibig Fund, raised P2 billion in five-year bonds last week, said Pag-Ibig Fund president and chief executive officer Romero Quimbo.
The bonds carried a yield of 5 percent per annum, the lowest rate of any of Pag-Ibig Fund’s bond issue and among the lowest reported by any state-run company. The rate for the benchmark five year treasury bonds in the secondary market stood at 5.82 percent during the time of the auction.
Pag-Ibig Fund’s bond issue, which was handled by Development Bank of the Philippines and Land Bank of the Philippines, was almost three times oversubscribed with bids totaling P5.502 billion.
Pag-Ibig said in a statement that some P700 million of the bonds would be offered to retail and other investors under a clawback provision.
Retail investors may invest in the bonds from March 14 to March 20 while developers and insurance firms that have not participated in the bidding may purchase them from March 19 to March 20.
Retail investors may buy the bonds in denominations of P10,000.
“The response of the market to our latest housing bonds is overwhelming. Large private institutions like banks and pension funds and workers’ provident funds were among our major investors. Because of this, the fund was able to price the bonds at 5 percent per annum which is lower than the prevailing market rate,� Quimbo said.
Bankers said the low interest rates on the bonds were due mainly to falling interest rates and the huge amount of liquidity in the system.
“Government recognizes that it cannot do it alone. It needs to tap private sector funds. Our task in government is to primarily provide a mechanism for fund sourcing that can be trusted by the private sector. The private sector will not put in money to any of the government’s programs unless the channel of disbursement is trustworthy,� Quimbo said.
Proceeds from the bond issue will be used to finance government’s housing program.
As of the end of 2006, the assets of the Pag-Ibig Fund totaled P191.55 billion, up 7.43 percent from P178.3 billion reported at the end of 2005. Net income last year amounted to P7.7 billion.