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PIA Press Release
2008/07/12

Comval town explores bond market

Davao City (12 July) -- Looking for ways to finance their infrastructure project, the Municipality of Nabunturan, the capital town of Compostela Valley province is exploring various financial schemes like bond flotation.

One of the town's major projects, the construction of a new public market would involve Nabunturan issuing P90-million worth of interest-bearing bonds to be paid up until 10 years.

Mayor Macario Humol guesting at the Kapihan sa Comval held last July 9 at the Provincial Capitol building, said the bond flotation is a revenue generation strategy, one of the means as encouraged by the Local Government Code in which LGUs can finance their development projects.

He said they were looking for ways to finance the P90-million public market; the town was considering taking out loans, bond flotation or build-operate-transfer (BOT) scheme. "lisod ang piecemeal allocation." (piecemeal allocation is very difficult) the Mayor said on the idea that the public market would be built using allocated budget, which means the project would be built by piece-by-piece depending on the availability of the budget.

They decided on generating the funds needed for the new market through bond flotation as it possesses advantages. First is that it ensures community participation as the Code provides that bond flotation requires series of consultations. Another is that unlike loans, bonds do not hold internal revenue allotment as collateral.

Another advantage is that bond flotation would invite more investors to the town. As flotation itself is an invitation to invest. Mayor Humol also said that the no cure, no fee principle would apply for financial advisers, which means if they would not come up with the required amount they would not be paid.

Financial advisers are those who will handle the bond flotations as provided by law, these consultants are required before LGUs can issue bonds.

Humol also said that the bond flotation reflects the financial standing of the town as not all LGUs can issue bonds. "Only those without debts conduct bond flotations," the Mayor said. The town has already settled its obligations and is debt free, Mayor Humol said. (PIA) [top]

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