MNTC to issue P3-B fixed rate notes

The Manila North Tollways Corp. (MNTC), a consortium led by the Lopez group, will issue P3 billion in seven-year Fixed Rate Corporate Notes (FXCNs) with an option to increase the issue size to P5 billion.

MNTC, the builder and concessionaire of the North Luzon Expressway (NLEX), will use proceeds from the offering to refinance a portion of its existing dollar obligations.

The company is refinancing its project loans amounting to about $201.75 million. It is currently negotiating with its existing creditors and reportedly has received initial positive feedback to the proposed terms of the refinancing facility.

The FXCNs were given a PRS Aaa rating by Philratings, the highest possible rating on the PhilRatings scale.

A rating of PRS Aaa is given to securities with the "smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secured," PhilRatings explained, adding that "while the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues."

In assigning the rating, PhilRatings considered NLEX’s position as a major thoroughfare and infrastructure backbone for the Central and North Luzon regions; supportive concession agreements with an affirmed obligation from the Philippine government to implement adjustments in the Authorized Toll Rate (ATR), and the company’s strong operating and financial performance, as well as its cash-generating abilities demonstrated in its first year of operations (2005) and which are expected to be sustained or enhanced in the coming years.

PhilRatings also cited the high level of professional capability and financial expertise of MNTC’s institutional sponsors, investors, and project managers.

PhilRatings noted that this was amply demonstrated when they successfully implemented the infrastructure project during the construction phase and into the challenging first year of operations.

The rating agency also noted that MNTC was able to implement its significantly higher initial toll rates without any major opposition from different sectors. "MNTC management team and shareholders have the skills and deftness in operating in the peculiar social and political milieu that is the Philippines," PhilRatings said.

Moreover, PhilRatings noted that the 84-km expressway is one of the biggest infrastructure projects undertaken in the country in the last 10 years.

"It is an infrastructure that is crucially needed and required by both the private and business sectors. Thus, the Philippine government – acting through the Toll Regulatory Board (TRB) – is supportive of the NLEX and thus assures its viability with parallel government moves in building complementary government infrastructure projects that will help enhance the traffic in the expressway," Philratings said.