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Napocor fails to electrify the market

Issuer: Napocor International Finance TrustAmount: $500 millionLaunched: February 1 2002, put on hold February 4 2002Lead manager: Bear Stearns


The $500 million seven-year bond issue for Napocor International Finance Trust, the soon-to-be-privatized Filipino National Power Corporation, had already attracted a lot of criticism before it was put on hold for the second time on February 4. Much of this stemmed from the issue's structure, variously described as "innovative" or "ill-conceived", depending on whom you ask.

The deal was initially intended for the fourth quarter last year but was delayed amidst poor market conditions following the attacks on the World Trade Centre in New York. The second attempt at the deal was embarrassingly abandoned at the eleventh hour by bookrunner Bear Stearns and co-lead JPMorgan while Philippines' president Gloria Macapagal Arroyo was in New York attending the World Economic Forum.

The bond was structured to include political risk insurance (PRI), which provides protection against the risk of convertibility and transferability restrictions being imposed, and the risk of appropriation.

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