MANILA, Philippines - Manila Electric Co. (Meralco) will raise P5.5 billion through the issuance of corporate notes, providing the power utility with additional funding for its projects.
In a disclosure to the Philippine Stock Exchange, Meralco said the executive committee of the company’s board of directors approved the financing scheme yesterday.
Meralco said the bond issuance will be handled by First Metro Investment Corp. as lead arranger, with SB Capital Investment Corp. as co-lead arranger and Insular Investment and Trust Corp. as co-arranger.
The notes will be issued on Dec. 14, proceeds of which will be used for their corporate requirements, Meralco said.
Meralco treasurer Rafael Andrada said the notes issue forms part of the company’s P11-billion refinancing program for the remainder of the year.
He said the company will likely raise the remaining half, or another P5.5 billion, by next year. “Maybe its too late to raise the remaining P5.5 billion so we will do it next year,” he said.
Meralco has earlier hinted that it was already exploring talks with two banks for the P11-billion refinancing program. During that time, Andrada said they may do it on a piece-meal basis.
“If there is a good offer to raise the entire amount, we will consider. If we will raise the P11 billion, it is mostly to be a syndicated loan. Or we can do it little by little,” he said.
Meralco recently signed a P3-billion five-year bilateral term loan agreement with Union Bank of the Philippines, bulk of which, or P2.5 billion, would be used to refinance syndicated loans maturing in January 2010 while the remaining P500 million would be utilized as a general fund.
This year, Meralco is scheduled to pay P3 billion on principal and interest for their P12-billion restructured loan secured in 2006.
Meralco’s total debts dropped 28 percent to P16.04 billion as of the first quarter of 2009, from P22.37 billion in the same period in 2008.
Early this month, Standard & Poor’s, a renowned international credit rating agency, raised the long-term foreign and local currency corporate credit ratings of Meralco to ‘B’ from ‘B-’.
“The outlook is positive. The rating upgrade reflects Meralco’s improving financial risk profile as a result of higher tariffs, reduced reliance on short-term debt, and improving leverage position and financial flexibility,” the agency said.
S & P also took note of the improving cash flow of the power distribution firm.“Meralco’s liquidity position is improving, in our view. A large portion of its short-term debt has been repaid or refinanced at longer maturities,” it said.
”The utility’s heavy reliance on short-term debt in the past limited its financial flexibility,” S & P said.
The rating agency also gave credence to the entry of big investors into the utility company, which helped in the improvement of its financing position.
“In addition, Meralco’s new owners — Philippine Long Distance Telephone (PLDT) — are leading Philippine companies with dominant businesses, which, in our view, have supportive banking relationships,” it said.