Philippine Ratings retains PRS A grade for MRT III notes

MANILA, Philippines - Philippine Rating Services Corp. (PhilRatings) maintained its PRS A plus rating for tranche 3 of MRT III Funding Corp.s asset-backed notes. 

A PRS A rating is defined as “with favorable investment attributes and are considered as upper-medium grade obligations.”

Although obligations rated PRS A are somewhat more susceptible to the adverse effects of changes in economic conditions, the obligor’s capacity to meet its financial commitments on the obligations is still strong.”  The “plus” further qualifies the rating.

The notes issue is a securitization of future dividends from Metro Rail Transit Corp. (MRTC) which flow through a series of holding companies and special purpose vehicles, to MRT III Funding Corp., the issuer of the notes.  

The dividends arise from equity rental payments made by the Department of Transportation and Communications to MRTC under a 25-year build-lease-transfer agreement for the construction of the Light Rail Transit System phase 1 in Metro Manila. 

The local credit watcher’s ratings are based on available information at the time the rating review was done.

PhilRatings said it shall continuously monitor developments relating to the MRT III transaction and could change the ratings at any time, should circumstances warrant a change.

In maintaining the rating, PhilRatings took into account the uncertainties on government’s continued timely remittance of equity rental payments (ERPs) given possible administrative charges with the installation of a new national leadership in 2016.

 “In addition to the regular remittance of ERPs, the impact of these administrative changes on the outstanding operating issues of the train system is also uncertain,” Philratings said.

Historically, ERP remittance by the government has not consistently followed a regular pattern.  From 2005 to 2007, the issue rating for the notes underwent a series of downgrades as the then irregular ERP remittance by the government raised significant doubts on the timely payment of maturing note tranches, PhilRatings noted. – With Louella Desiderio