Friday, 26 February 2010

NDC buys $1-Billion MRTC preferred shares

Transfer from Land Bank and DBP
Manila Bulletin

The National Development Co. (NDC) is buying $1.02-billion worth of preferred and securitized bonds held by government financial institutions (GFIs) Land Bank of the Philippines and Development Bank of the Philippines in Metro Rail Transit Corp. (MRTC) this year, of which the first tranche or $300 million will be transacted before March 30.

Land Bank Executive Vice President Cecilia C. Borromeo said NDC, as per an executive order signed last January 18, will purchase $150 million of preferred MRTC bonds from Land Bank in the next few weeks, as well as the other $150 million held by DBP.

“NDC will take the bonds from us after a BSP (Bangko Sentral ng Pilipinas) rule and NDC will sell the shares to the banks,” said Borromeo. Both Land Bank and DBP exceeded a BSP rule imposing a limit on how many “non-allied” shares a bank could own in a corporation when they purchased 22 percent preferred shares in MRTC last year.

Borromeo said the next move is to sell the rest of the 75 percent securitized bonds in MRTC amounting to $360 million within the year, also directed by the same EO. Both Land Bank and DBP has $720 million of combined MRTC bonds to be disposed in the next months.

Land Bank First Vice President Alex Macapagal said one of the arrangements currently discussed is to forge bilateral agreements between Land Bank, DBP and NDC which may involve share swaps and the issuance of promissory notes for the first tranche of sale.

“We’re discussing terms and valuations right now,” said Macapagal.

In an earlier interview, DBP President Reynaldo David said the first to go is the preferred or the unsecuritized interests since the securitized interests, which are the bonds, are the important shares because bonds are investible money.

For the March 30 deadline, the government banks only need to divest the equity holdings since they exceeded the limit imposed by the BSP and not the MRTC bonds.

Once NDC purchased both the preferred and securitized shares, it will dispose of the shares througha re-privatization.

Land Bank and DBP took the center stage in buying out MRTC shares for a majority block. Both banks, acting on a directive from the National Government, paid $500 million after an assurance of an exit plan via the NDC. The NDC had to be named as the exit mechanism of Land Bank and DBP as a requirement of the BSP’s Monetary Board for the investment of the state owned banks in MRTC

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