Sources revealed yesterday that the Metropolitan Waterworks and Sewerage System (MWSS) would enter into a debt-for-equity swap for a total of $20 million, immediately giving it 30 percent of Maynilad.
According to the source, the rest of the foreign-held interest would be swapped next year although it was not immediately known what amount would be involved in the second stage of the swap.
The source said negotiations are still on-going. In the meantime, it was agreed that MWSS would not draw down from Maynilad’s $200-million performance bond.
Maynilad is 60-percent controlled by the Lopez-owned Benpres Holdings while the balance is held by Ondeo Waters, an affiliate of Suez Lyonnaise des Eaux. Sources said that Ondeo is pulling out of the consortium after Maynilad hit hard times that led to its inability to continue meeting its obligations to the MWSS.
The French-Philippine utility was ordered by the international arbitration court to pay $109 million in dues to the government to maintain its 25-year concession agreement.
However, sources said Ondeo is reportedly not interested in holding on to its interest in Maynilad and the MWSS will be forced to take over the holdings since it is Maynilad’s primary creditor.
"I don’t know if this would qualify as a contract re-opener under the rules and regulations of the Philippine Build-Operate-Transfer Law," the source said. "But if it falls under this category, the transaction would have to be approved by the Investment Coordinating Committee (ICC)."
Under Section 12.10 of the BOT Law implementing rules and regulations, Maynilad’s contract with the government could be reopened "where it is necessary due to conditions beyond the control of the parties involved and in times of extreme, unforeseeable conditions."
"The parties to the contract will agree on the specific conditions that will necessitate or result in a re-negotiation and modification of some or all of the substantial provisions of the contract,"the rules stated.
Sources said the debt-for-equity swap is effective immediately or at least before the end of the year while the concluding portion would be undertaken in 2004.