MNTC to prepay $112-M foreign loans

The Lopez-controlled Manila North Tollways Corp. (MNTC) is planning to prepay some $111.7-million worth of debt to take advantage of the strong peso and secure cheaper funds to bankroll its projects.

The prepayment plan has been approved by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) which itself has been prepaying some of its foreign loans while the peso continues to appreciate against the dollar.

BSP Governor Amando M. Tetangco Jr. said the peso has already risen to such levels that it made business sense for corporations to review their foreign debt portfolio and consider the possibility of prepaying some of them to save on interest payments.

MNTC plans to prepay $111.7 million out of a total of $253.5-million worth of principal loans that the company earlier secured from foreign creditors.

BSP Deputy Governor Diwa Guinigundo revealed that the MB approved the prepayment which would involve MNTC’s acquisition of foreign currency either from the spot market or from the BSP.

Guinigundo said MNTC then planned to borrow a total of P6 billion from the domestic market by floating fixed-rate corporate notes.

"This would be cheaper for them rather than continue carrying what is by now more expensive foreign debt," he said.

While the FRCN float is being prepared, MNTC is planning to secure some bridge financing for $96 million from Mizuho Bank of Japan.

MNTC was granted the concession to finance, design, rehabilitate, expand, operate and maintain the North Luzon Expressway (NLEX).

The company also now holds the usufructuary rights, interests and privileges of the Philippine National Construction Corp. (PNCC), the state-owned company that used to manage the NLEX.

MNTC is allowed to collect tolls during the concession period of 30 years after which the project roads would revert to the government at no cost.

MNTC is controlled by its main shareholders, the First Philippine Infrastructure Development Corp. (FPIDC) – a wholly-owned transportation subsidiary of First Philippine Holdings Corp. (FPHC) – and Benpres Holdings Corp.

Together with the PNCC and Transroute S.A. of France, FPIDC established the MNTC to take over the rehabilitation of the NLEX.

MNTC’s other shareholders include Leighton Asia Ltd. and Egis Projects S.A.–the investment and development arm of Group Egis, part of the world’s largest toll operator with 40 years of experience.

Tetangco said aside from MNTC, other private corporations are also applying for the BSP’s approval of plans to prepay foreign loans to take advantage of the appreciation of the peso which has created some leeway for borrowers to look for cheaper debt.

The BSP itself has already prepaid three of its maturing foreign obligations this year for a total prepayment of $1.17 billion, saving about $32 million in interest payments.

Tetangco would not disclose exactly how much private foreign loans are being prepaid but he said the approved applications so far amounted to "several hundred million dollars."

"There are still a few in the pipeline," Tetangco said.

According to Tetangco, prepaying foreign loan started to make sense for the BSP as well as some private corporations as the peso appreciated to the level where it would save more to prepay and then borrow cheaper funds.

The latest available data from the BSP indicated that the GIR reached a new record high in September of $21.56 billion as dollar inflows also reached record levels due mainly to the Arroyo administration’s heavy foreign borrowing.

According to the BSP, the GIR also increased due to inflows from the BSP’s foreign exchange operations which helped mitigate the foreign exchange requirements for payments of the National Government and BSP’s maturing obligations.

The BSP said the preliminary end-September GIR level was adequate to cover about 4.3 months of imports of goods and payments of services and income.

The country’s record-high GIR has pushed the balance of payments (BOP) to a surplus, recorded at $2.528 billion for the first eight months of the year.