EO clears way for NDC acquisition of MRT stake

MANILA, Philippines - The government, led by the Department of Finance (DOF), will start negotiating with the National Development Co. (NDC), the state-owned investment arm, for NDC’s acquisition of the government’s controlling stake in Metro Rail Transit Corp. (MRTC) held jointly by the Land Bank of the Philippines (Landbank) and the Development Bank of the Philippines (DBP), a Finance official said over the weekend.

This as Malacañang finally issued an EO allowing NDC to acquire the MRTC stake held by the two government financial institutions.

“There is an EO already but we still have to negotiate with NDC on the mechanics and structure of financing,” said Finance Undersecretary Rosalia de Leon.

De Leon said NDC would need roughly $300 million for the first phase of the “take-out.” The $300 million would serve as initial payment for a portion of the preferred shares held by Landbank and DBP in the 17-kilometer MRT-3 along EDSA.

The Finance official said the acquisition is expected to be completed within the first quarter of the year.

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 (BSP) to sell their holdings.

NDC is looking at issuing bonds to raise funds for the acquisition but may also tap a syndicated loan from private banks to raise the initial $300 million.

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

DBP president Reynaldo David has said that at least five investor groups are vying for the combined controlling stake of the two banks in MRTC.

Of the five groups, three are foreign groups while the two are composed of local investors.

The interested parties are waiting for the two banks to divest their stake in MRTC before conducting due diligence.

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.