Why BSP opted for a loan instead of a bond?

BSP has decided to issue a syndicated loan instead of a bond causing a bit of a flutter in banking circles.

Earlier this week, the Philippine central bank, Bangko Sentral ng Pilipinas BSP, awarded the mandate for a $500 million five-year syndicated loan to a group of seven banks. BNP Paribas, DBS Bank, ING Bank and Standard Chartered are the foreign banks, while BPI Capital, Metropolitan Bank Trust Co and RCBC Capital are the domestic banks forming the syndicate. The deal is in process and expected to be closed tomorrow at around 220bp over Libor, equivalent to about 250bp over Treasuries.

BSP is looking to pre-pay $740 million of another syndicated loan it borrowed in March last year. The existing loan matures in 2004. By borrowing at rates that would be cheaper than its existing...

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