10 December 2012, Philippine Daily Inquirer
by Doris Dumlao
The Megawide engineering and construction group has raised P6.5 billion through the sale of debt paper to partly fund a classroom-building project under the government’s public-private partnership framework.
Citicore-Megawide Consortium Inc.—which was formed by listed firm Megawide Construction Corp. and its controlling shareholders to undertake a P12.83-billion school infrastructure project—sold 10-year corporate notes with a one-year grace period.
PNB Capital served as lead arranger and sole bookrunner for the corporate notes issue, while state-owned Development Bank of the Philippines and Land Bank of the Philippines were co-lead arrangers.
Unlike retail bonds, which are sold through a public offering and must go through a more tedious regulatory approval process, corporate notes are a quicker fund-raising option for top-tier corporations as they are sold to no more than 19 selected institutional investors. In this case, the note holders are Bank of Makati, Bank of the Philippine Islands, DBP, East West Bank, Land Bank, Metropolitan Bank and Trust Co., and PNB.
Although there were other PPP projects awarded before, this was the first to take off, said Philippine National Bank chairperson Flor Gozon-Tarriela.
Education Undersecretary Francis Varela said this facility was “ground-breaking” as this was the “most significant funding for social services” that he could remember.
“Our company is now ready to do its share in nation-building,” said Megawide president Edgar Saavedra during the signing of the corporate loan facility on Friday. “Megawide is tasked with the construction of quality classrooms conducive to a healthy learning environment for our country’s future leaders.”
“Backed by our company’s value engineering, we will build schools/classrooms that are within government’s budget but with superior quality and at a faster pace through the use of superior technology,” he said.
Oliver Tan, chief finance officer of Megawide, said the corporate notes would have a tenor of 10 years plus a one-year grace period. It will have fixed interest rates for the first five years with a repricing on the sixth. He said interest rate would be based on benchmark five-year PDSTF plus a certain spread upon drawdown by January next year. He estimated that the coupon rate would likely be within the 5.5-6 percent per year range.
Megawide earlier created the joint venture with parent firm Citicore Holdings Investment Inc. Citicore controls 90 percent of the venture while Megawide owns the remaining 10 percent, a structure intended to spread any balance sheet risk arising from this PPP project.
In August, the Megawide-Citicore consortium won the DepEd’s school infrastructure PPP packages (A and B) for Region III and Region IV-A, respectively, with lease payments worth P523 million and P760 million each year for the next 10 years. These figures represent the annual lease payment to be made by DepEd to Megawide within the next 10 years in exchange for the construction of the school buildings.