Napocor allowed to transfer $2.5-B of bonds to PSALM

The National Power Corp. (Napocor) has been allowed to transfer $2.5 billion worth of bonds to the Power Sector Assets and Liabilities Management Corp. (PSALM), also securing affirmation that the National Government would continue to guarantee the bonds.

In a report to the Bangko Sentral ng Pilipinas (BSP), the Department of Finance (DOF) said it has approved the transfer of the bonds, pursuant to the provisions of the Electric Power Industry Restructuring Act (EPIRA).

In the letter, Finance Secretary Margarito B. Teves said the transfer of the bonds would have no financial impact since the amendment of the loan agreements only involved the substitution of issuer.

"There is no change in the financial terms of the facilities as represented by PSALM," Teves said.

According to Teves, the approval of the transfer was also supported by the Department of Justice (DOJ) opinion issued to the BSP that the transfer of the Napocor’s liabilities to the PSALM carried with it the automatic transfer of the covering guarantee of the republic.

Under the EPIRA, PSALM was mandated to take ownership of all existing Napocor generation assets, liabilities, independent power producer (IPP) contracts, real estate and all other disposable assets of the power company.

Under the law, all outstanding obligations of the Napocor arising from loans, issuance of bonds, securities and other instruments of indebtedness were also to be transferred to and assumed by PSALM.

The bond transfer would cover $250 million worth of 5.4 percent certificates due 2018; new guaranteed bonds amounting to $191.604 million due 2006; $299.548 million due 2028 and another $159.867 million.

The transfer also included $400 million worth of guaranteed floating rate notes due 2011 (two tranches); $500 million guaranteed bonds due 2010 and two tranches of $700-million zero coupon bonds due 2010.

The DOF informed the BSP’s Monetary Board that the transfer was being undertaken since all foreign borrowings and their respective sovereign guarantees have to be approved by the board.

"The department finds no anticipated financial impact of the proposed transfer since there is no change in the financial terms of the facilities," Teves said.