SEC okays Cityland’s P2-B STCPs

The Securities and Exchange Commission has approved the planned short-term commercial paper (STCP) issuances of the Cityland Group worth around P2 billion.

Half of the P2-billion STCP will be issued by Cityland Inc. while the other half will be sold by Cityland Development Corp. (CDC).

Proceeds from the STCP issuances will be used to pay down maturing loans and fund the development of real estate projects.

CDC’s proposed P1-billion STCP issue was given a PRS 2 rating by the Philippine Rating Services Corp. (Philratings), the country’s main credit rating agency.

A rating of PRS 2 is defined as: “Above average (strong) capability for payment of commercial paper issue on both interest and principal. Earnings trends and coverage ratios, while sound, will be more subject to variations.

In assigning the rating, Philratings took into account CDC’s strong position in the real estate industry, having developed over 35 condominium projects. It also holds the record of delivering all its launched projects.

“CDC has developed a good brand name for affordable condominium properties which is established and known for timely delivery, and is supported by satisfied customers. The management and marketing team appear to have the knowledge and skills to continue with their momentum of revenue growth, and to compete and take advantage of the favorable developments in the property market,” Philratings said.

Last year, CDC reported a 48.5-percent jump in its net profit to P495 million from only P333.6 million.

Philratings said CDC’s progressive sell out and construction accomplishments of its recently completed and ongoing condominium projects, the interest income to be generated from financing the credit sales of these projects, coupled with operations under a prudently controlled cost environment, should allow the company to sustain the growth in its earnings.

Philratings said while CDC’s gross profits from sales of real estate are expected to decline this year and next year, the company would still likely attain its estimated targets for 2007 to 2009, given its track record in launching, pre-selling and completing projects on time, and the continuing progress in the property development sector in the intermediate term.

“CDC has consistently managed to generate cash from operations, more than adequate to finance receivables and project development costs for the past three years; and such capability is expected to continue during the immediate term,” Philratings said.

Philratings, however, noted CDC’s increasing debt From only P1.9 billion in 2005, the company’s consolidated debt level went up to P2.7 billion last year.