5 groups eye MRT controlling stake

MANILA, Philippines - At least five investor groups are vying for the combined controlling stake of the Land Bank of the Philippines and the Development Bank of the Philippines (Landbank) in Metro Rail Transit Corp. (MRTC), DBP president Reynaldo David said in an interview.

This developed as David said state-owned National Development Co. (NDC), the government’s investment arm, is expected to complete the acquisition of the banks’ stake in MRTC in the first quarter of the year.

“We’re working with NDC and we’re waiting for the Executive Order to be signed,” he said, adding that President Arroyo needs to issue the EO to implement the NDC buy-out.

Of the five groups, three are foreign groups while the two are composed of local investors, David added but declined to divulge the identities of the interested parties given the sensitivity surrounding the transaction.

“They all expressed interest and they want to do due diligence,” he said.

However, David said the government cannot allow the interested parties to do due diligence until the two state-owned financial institutions have divested their stake in MRTC as had been planned.

Landbank and DBP acquired a 75 percent controlling stake in MRT early last year at an estimated shared cost of $800 to $900 million but they are required by the Bangko Sentral ng Pilipinas to sell their holdings.

NDC may opt to tap a syndicated loan from private banks to raise at least $300 million to pay Landbank and DBP for a portion of their controlling stake in MRTC.

The $300 million will serve as initial payment for the preferred shares of Landbank and DBP in the 17-kilometer MRT 3 along EDSA.

NDC is also looking at issuing bonds to raise funds for the acquisition.

Once NDC buys the stake of Landbank and DBP, the government would again sell this to the private sector.

The government is spending $130 million per year for equity rental payments, maintenance rental payments, and  operating and administrative costs for the elevated railway, compared to annual revenues of only $39.56 million.

Both the Department of Finance and the BSP reminded Landbank and DBP that government should not place a large portion of its investible funds in one venture that may not give returns in a short period, may end up at a loss, or compete with the private sector.

Finance officials said another option, if government fails to privatize MRT 3, is to raise the MRT 3 fares.

Based on a government study presented by the DBP, fares should be increased from an average rate of P12.50 to P60.50 to remain profitable.