MPIC says MRTC shareholders oppose government buyout plan

Posted at 01/24/14 9:52 AM

MANILA, Philippines - Conglomerate Metro Pacific Investments Corp. (MPIC)—which claims control over Metro Rail Transit Corp. (MRTC) by virtue of its acquisition of shareholdings of bondholders—said shareholders of the rail company are opposed to ongoing efforts of the government to gain full ownership of the railway system.

“The equity shareholders are opposed to a buyout plan because they want to continue with the expansion rights,” said MPIC President Joey Lim.

MRTC, which built the railway system, holds the build-lease-transfer (BLT) contract for the third line of the Metro Rail Transit Line 3 (MRT3) system. The Pangilinan-led MPIC accounts for 48 percent of MRTC.

Lim said the shareholders have yet to be formally notified by the government, which is now pursuing an equity value buyout (EVB). “I haven’t heard of any notification,” said the MPIC official.

MPIC has twice submitted a proposal to the Department of Transportation and Communications (DOTC) to undertake the capacity expansion program for MRT3 but the government had rejected this offer and, instead, decided that a buyout is a better approach. “We are much better off executing the buyout,” said DOTC Secretary Joseph Emilio Abaya.

MPIC has offered the government $300 million to expand the capacity of the rapid transit system and $350 million for the acquisition of equity and some of the bonds issued by the MRTC.

“The buyout that is being contemplated by the government is an EVB. Technically, the EVB is an option to protect the shareholders of MRT3. What we proposed to the government is for us to allow or to consider the expansion plan, as proposed by MPIC, that does not invoke an EVB because it works off the existing BLT,” Lim pointed out.

The government is pursuing a buyout as a way to get out of the heavy subsidy it has been providing MRT3 for the past decade. The DOTC said the government has, so far, shelled out P75 billion in subsidy for the rapid transit system. The buyout is meant to ease the government of its 15-percent equity rental payments. Once the planned buyout is executed, the DOTC is said to be contemplating on privatizing the operation and management (O&M) of MRT3.

Malacañang earlier issued Executive Order 126 which directs the Department of Finance and the DOTC to buy out MRT3 from MRTC, pursuant to the BLT agreement.

The government will also buy out the 77-percent economic interest of two state-owned lenders, Development Bank of the Philippines and Land Bank of the Philippines.

In August last year Abaya said the government will allot P55 billion to P56 billion to buy out the private owners of the MRT3.

“The figure of P55 billion to P56 billion is all in,” said Abaya in a previous interview. “The O&M is dependent on [the buyout]. We can only work on [privatizing] the O&M after the buyout,” said Abaya.