CEBU, Philippines - The Cebu City government is asking the Land Bank of the Philippines to waive the P43 million pre-termination fee that the city would incur in paying off the remaining P2.4 billion loan used in the reclamation of the South Road Properties.
In a letter dated November 4, Mayor Michael Rama said the request is sanctioned under Section 6 of Article I of the Subsidiary Loan Agreement between the LBP and the city for the Cebu South Reclamation project.
Section 6 provides that the “Lender (city government) shall not charge the borrower (LBP) handling and commitment fees. No pre-payment penalty shall likewise be charged provided that OECF (Overseas Economic Cooperation Fund) likewise waive the same. Provided, further, that in case the borrower pre-terminates the sub-loan, it shall be liable to the lender for the payment of gross receipt tax as provided under Section 119 of the National Internal Revenue Code.”
It was in 1996 that the city entered into an agreement with the Japan International Cooperation Agency for the Y12.315 billion or around P4.65 billion loan. The amount was utilized to finance the reclamation of the 300-hectare SRP.
As of now, the city still owes JICA over P2.4 billion including the pre-termination fee. The remaining balance is supposedly due in 2025.
Rama also asked LBP’s endorsement to the Bangko Sentral ng Pilipinas for the latter’s approval to pre-terminate the loan.
He also informed LBP that the city government has been moving in accomplishing the documentary requirements essential to prepay the loan.
“At present, the Cebu City government has obtained the City Council Resolution approving the prepayment of the loan from Land Bank of the Philippines, a letter from the Bureau of Local Government Finance and Department of Finance concurring with the city government’s position as regards the proposed debt prepayment with JICA,” he said.
He said JICA interposes no objection to the city’s intention to prepay the loan.
JICA’s chief representative, Noriaki Niwa, however, informed Rama through a letter dated October 28 letter that the intention of the city to prepay the loan should be referred to LBP.
“In order to proceed with the prepayment procedures, CCG (Cebu City Government) would need to consult with LBP as well as other related authorities and agencies and comply with the requirements as such before LBP makes a request to JICA for prepayment, if they decide to do so,” the letter reads.
In a November 6 letter, Rama informed BSP Governor Amando Tetanggo Jr. about the prepayment of the loan.
“With the foregoing, it is with hope that Bangko Sentral ng Pilipinas will give its approval over Cebu City government’s prepayment of its loan with JICA. Your assistance upon the matter will greatly aid the City of Cebu in realizing its objective of a debt-free city and achieving better services for the city’s constituency,” Rama said.
The mayor went to Manila last Thursday to meet with officials of LBP and BSP. — Jean Marvette A. Demecillo/JMO (FREEMAN)