BCDA’s P1.2-B bond float keeps Baa rating

The Philippine Rating Services Corp. (Philratings) has retained its PRS Baa rating for the Bases Conversion Development Authority (BCDA)’s P1.2 billion bonds.

A PRS Baa rating is defined as : "Neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time."

In its rating, Philratings took into account BCDA’s favorable debt maturity profile as well as its improving asset quality in the light of recent joint development deals. Transactions closed last year with Ayala Land Inc., the Alliance Global Group, Megaworld Properties Holdings Inc., Bellevue Properties Inc., and Century Properties are expected to improve BCDA’s cashflows going forward.

"The finalization of such deals reflects a better outlook for the property market although the sustainability of BCDA’s asset disposition program over the short to medium-term still bears close watch," Philratings said.

BCDA incurred a net loss of P175 million for the period January to November last year. Cash balances, however, remained quite significant at about P1.9 billion as of November 2003.

The finalization of an agreement regarding the restructuring of past due receivables from Club John Hay Development Corp. and the non-payment of due amounts even after the said restructuring have also been considered in arriving at the credit rating.

Philratings likewise noted the unresolved dispute between BCDA and Manila International Airport Authority (MIAA) regarding the latter’s unpaid rentals for NAIA Terminal 3 amounting to about P590 million. In December 2003, the Department of Justice (DOJ) issued a resolution favoring BCDA’s claim that lease payments should have begun in 1999 when the site was turned over to the MIAA.

MIAA, however, has since filed a motion for reconsideration and the case remains pending to date. "Political risk also remains a significant concern given the evidence that resources of BCDA can be diverted for purposes over which BCDA has no effective control in implementation. Also, as a government corporation, BCDA is likewise vulnerable to changes in national leadership, particularly with the upcoming May 2004 elections, where there is a potential for disruption in the continuity of current management’s plans and strategic direction," Philratings said.