CEBU, Philippines - The Cebu City Council has declined to tackle the proposals of three banking institutions for the conversion of the city’s yen-denominated loan incurred in the construction of the South Road Properties, as it was still “premature” to entertain them.
In an executive session yesterday, the council refused to hear the financial restructuring plans of Philippine National Bank, Land Bank of the Philippines and Development Bank of the Philippines to convert to a peso-denominated loan the SRP amortization the city needs to pay until 2025.
City Councilor Sisinio Andales said presentation of the proposal was still “premature” because there is yet no approved council resolution authorizing Mayor Michael Rama to undertake the conversion scheme.
Andales said Rama has to get an approval from the council before making any negotiations, and must lay down the terms and conditions on how the loan conversion should be done to apprise the council.
“It (presentation of proposals) was a waste of time. It’s still premature yet, not unless and until the Office of the Mayor would request the council for the passage of the conversion by way of requesting the Monetary Board and JICA,’ Andales said.
City Councilor Margarita Osmeña agreed, saying the executive department needs to get authorization from the Monetary Board of the Bangko Sentral ng Pilipinas and the Japan International Cooperation Agency.
The BSP which receives the loan guarantee fee the city pays twice a year to the national government while JICA granted the 12.315-billion yen (P6.5 billion) loan for the development of the 300-hectare SRP.
“Before we do the loan conversion, we need to ask permission from JICA and BSP because they may or may not agree. They may not agree because the funds are already in place,” Osmeña said.
According to City Accountant Mark Salomon, Rama assured during their recent meeting that he will discuss the loan conversion and restructuring proposal with JICA and BSP.
Yesterday, City Councilor Alvin Dizon moved for the executive department to conduct various consultations with stakeholders on the “necessity and practicability” of converting the loan.
DBP senior assistant vice president Fernando Lagahit said it is high time to restructure the loan since the “peso has been strengthened against the dollar and yen.”
“The conversion is better for the city and we, the interested banks, will give you the tenure of the remaining loan and fixed interest rate,” he added.
“We are willing to take out this conversion. We’ve been studying this loan will help stop the bleeding of ballooned amortization interests,” PNB manager Joy Opacu, on the other hand, said.
The city has already paid a total of P6.8 billion, which is bigger than the original loan, inclusive of the national government’s guarantee or commitment fee amounting to P546.36 million.
The bulk of what the city has paid, so far, has gone to interest payments and the national government’s share.
If the city continues paying its loan, which is yen-denominated, until 2025, it is projected to suffer a foreign exchange loss of approximately P992.63 million.
The city sets aside P300 to 500 million a year for the SRP loan. Of the amount, P150 million to P200 million is for the interest payment and the guarantee fee.
`Rama wanted the current scheme overhauled. Among the solutions the city government eyes is to allow a local bank to restructure the loan by converting the foreign-denominated loan into peso to free the city from having to pay the guarantee fee, which is ballooning due to foreign exchange rate loss.
As loan guarantor, the national government gets one percent of the loan balance, which Cebu City is obligated to pay. At present, the city has an outstanding balance of P2.9 billion based on the prevailing foreign exchange rate. (FREEMAN)