MRT III obtains credit rating upgrade for asset-backed notes

MANILA, Philippines - MRT III Funding Corp. has obtained a credit rating upgrade from domestic credit watcher Philippine Rating Services Corp. for its asset-backed notes.

The notes are due in 2013, 2014 and 2025.

In a statement, PhilRatings said MRT III was issued a rating of PRS A for Tranche 2-D, up from the previous PRS Baa minus, and PRS Baa for Tranches 2-E to 2-G and Tranche 3.

A PRS A rating is defined as: “With favorable investment attributes and are considered as upper-medium grade obligations. Although obligations rated PRS A are somewhat more susceptible to the adverse effects of changes in economic conditions, the obligor’s capacity to meet its financial commitments on the obligations is still strong.”

According to PhilRatings, MRT III had more than sufficient funds to cover the principal payment for Tranche 2-D of the notes as of credit rating date.

“The issue trustee, Bank of New York Mellon, has confirmed with PhilRatings that it holds a balance of $115.9 million as of July 1, 2011 for the notes. The balance more than covers the principal payment of $81.5 million of Tranche 2-D due on Aug. 8, 2011,” PhilRatings said.

A PRS Baa rating, on the other hand, exhibits adequate protection parameters. “Adverse economic conditions and changing circumstances, however, are more likely to lead to a weakened capacity of the obligor to meet its financial commitment of the obligation. PRS Baa-rated issues may possess certain speculative characteristics”.

PhilRatings said the principal payment will go up to $99.9 million for Tranche 2-E in 2012, and will increase further for succeeding tranches in later years. 

PhilRatings said it would continue to closely monitor the regular build-up or remittance of funds to ensure that maturing note tranches will be paid on time.

The asset-backed notes issue is a securitization of future dividends from Metro Rail Transit Corp. (MRTC) which flow through a series of holding companies and special purpose vehicles, to MRT III Funding Corp., the issuer of the notes.

The dividends arise from equity rental payments made by the Department of Transportation and Communication (DOTC) to MRTC under a 25-year build -lease-transfer agreement for the construction of the Light Rail Transit System, Phase 1 (LRTS Phase 1, or MRT) in Metro Manila.