Just when it seemed the Philippines was on course for a first securitization since 1997, the latest political crisis surrounding President Gloria Arroyo has left ABS bankers wondering if any deal is possible in 2006.

The government has been working on a PHP17.5 billion ($333.5 million) deal backed by tax revenues due to be returned to local government units (ASR, 2/13/06).

The state withheld taxes collected by LGUs in 2001 when the government was mired in a fiscal crisis. President Arroyo recently backed the LGU Internal Revenue Allotment Monetization Program, allowing for LGUs to be reimbursed in installments over a seven-year period, starting in 2007.

To raise funds for the program, the government wants to repackage tax revenues into securitized bonds, sold at a discount to investors. Two state-owned banks - Land Bank of the Philippines and Development Bank of the Philippines - have been hired as joint arrangers. Bankers at the leads told local media before the latest turmoil that the deal could be launched before the end of March.

This seems highly improbable. An alleged attempted coup led Arroyo to declare a state of emergency. With the immediate focus on re-establishing the president's authority, bankers feel a deal would be impossible in the short term.

"The Philippines is a mess," commented one skeptical ABS banker. "I have watched and chased that market for eight years, and all I can say is the current turmoil is no surprise. It's hard to accomplish anything in such an uncertain environment."

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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