MRT consortium to raise $500-M in bonds

The consortium that operates the MRT system expects to raise at least $300 million to $500 million from the secondary offering of bonds in both the international and local markets.

Fil-Estate Land Inc. president Robert John Sobrepena said about 60 to 70 percent of the bonds will be offered to international investors while the balance will be offered locally.

The bonds, which are backed by future rental fees from the government, will be listed at the Luxemborg Stock Exchange and eventually to be listed in the soon-to-be-established fixed-income exchange to be operated by the BAP Consulting Inc.

Sobrepeña said as soon as the MRT III Funding Corp. Ltd. secures a triple A rating from the Philippine Rating Services Corp. for its bond issue, the consortium will file a registration statement with the Securities and Exchange Commission (SEC) covering the sale of asset-backed securities.

"We’re looking forward to an improvement in rating. We’re expecting a triple A rating, Sobrepena said. PRS Aaa-rated securities are defined as those with the smallest degree of investment risk.

The bonds were issued a PRS Aa rating, which is defined as: "Margins of protection may not be as large as in PRS Aaa-rated issues. Fluctuation of protective elements may be of greater amplitude or there may be elements which make the long-term risks appear somewhat larger than for PRS Aaa-rated issues." The MRT bonds were earlier issued a PRS Aa rating and are under continuing review as no settlement or restructuring has yet been finalized with respect to the $21 million past due maintenance fees payable to Sumitomo Corp. of Japan.

The MRT bond issue is considered the biggest and most significant securitization ever completed in Philippine capital markets. Its success is expected to generate more interest in ABS as alternative financing for companies while the market has yet to show signs of stability and banks have remained reluctant to lend more money.

"Ideally, we would like more foreign funds to come in. We need to encourage this kind of thing," Sobrepeña said.

Members of the consortium involved in the offering are the Fil-Estate Group, Anglo-Philippine Holdings Corp., Railco Investments, Sheridan LRT Holdings, and DBH Inc., which together hold 77 percent of MRT stock.

The ABS will be available only to qualified institutional buyers and investors which include banks, insurance companies, trust funds and pension funds. Penta Capital was tapped as financial adviser and issue manager for the bonds.

The bonds will have several maturities ranging from four years to 23 years and are expected to generate yields of 10.5 percent to 13 percent a year.

Proceeds from the offering will be used by members of the consortium to retire debts or strengthen operations.