State lenders seek exit strategy in govt-MRTC buyout deal

MANILA, Philippines - State banks tasked to buy out the Metro Rail Transit Corp. (MRTC) from the Sobrepeña group in favor of the government now want an exit strategy, threatening to further stall the plan. State lenders Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP) have expressed misgivings about completing the deal for the state, saying they do not want to book losses from the transaction. "When we acquire the MRTC, we want to make sure that we have an exit strategy. We don’t want to be saddled by it. The ultimate holder will be the National Government," a DBP official said on condition of anonymity. "We want to make sure the prices are clear between us (state lenders) and the National Government and between us and [the consortium]," the official said. "We can’t just take it just to accommodate the government," he added. The government has yet to hammer out details of the purchase plan, a source of concern for the two government financial institutions. Plans to buy out the Sobrepeña-led consortium, announced as early as last year, have been stalled by funding problems. The government initially looked at floating bonds to finance the purchase, but market conditions have since deteriorated, making borrowing costs more expensive. The state has now shifted the burden of consummating the purchase to DBP and LBP. Instead of the government directly buying out the MRTC, there is a proposal to consummate the transaction through the state lenders. The MRTC is the Sobrepeña-led consortium that built the MRT-3 line, which runs 17 kilometers from North Avenue in Quezon City to Taft Avenue in Pasay City. It operates under a build-lease-transfer agreement with the government that expires in 2025. The partnership, however, was mired by legal wrangling over the MRT-3’s rail extension, as well as the state’s concern about financing the P48 per passenger subsidy for the train’s operations. The government has offered to buy out MRTC from its contract ahead of the expiration for $865 million. — Maria Eloisa I. Calderon, BusinessWorld