Meralco to start drawdown of P5.5-billion notes

MANILA, Philippines - Power utility giant Manila Electric Co. (Meralco) will start the drawdown of its P5.5-billion fixed and floating rate notes facility with 13 institutional lenders by Dec. 14.

In a disclosure to the Philippine Stock Exchange, Meralco said this peso-denominated debt capital market transaction was lead-arranged by First Metro Investment Corp. with SB Capital Investment Corp. as co-lead arranger and Insular Investment and Trust Corp. as co-arranger.

The fixed rate notes due 2014 fetched a volume of P1.6 billion and were priced at the benchmark five-year PDST-F plus 125 basis points while P3.9 billion was awarded for the floating rate notes due 2015 with a pricing of 110 basis points over 3M PDST-F.

Meralco treasurer Rafael Andrada said the proceeds will be used for the company’s corporate funding requirements.

The P5.5-billion corporate notes issuance forms part of the power utility’s P11-billion refinancing plan set for the remainder of the year.

Andrada said Meralco will most likely raise the remaining half, or another P5.5 billion, by early next year.

This year, Meralco is scheduled to pay P3 billion on principal and interest for its 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.   — Donnabelle Gatdula