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CREDIT
rating agency Philippine Rating Service Corporation (Philratings)
has adjusted two notches downwards its score for MRT III
Funding Corporation Limited’s Asset-Backed Notes from
PRS Ba to PRS Caa.
A rating
of PRS Caa connotes poor standing, high possibility of
default and possible presence of elements of danger with
respect to principal or interest.
Philratings announced that with two months to go before
due date, there are not enough funds to cover principal
and interest payments of $69.1 million for Tranche 1 of
the Notes that are due on August 7 this year.
The
issue trustee, Bank of New York, has reported that it
presently holds a balance of $49.7 million for the
Notes, indicating therefore a shortfall of $19.4
million.
“Prudently, by this time, the amounts to cover payments
falling due should already be available, but they are
not, and it is not clear how the funds will be made
available in full and on time,” Philratings said.
The
equity rental payments (ERPs) payable by the Department
of Transportation and Communication (DOTC) to Metro Rail
Transit Corporation (MRTC) under the existing
build-lease-transfer agreement are the main source of
funds to cover payments under the securitization
transaction.
Historically, however, DOTC payments have never been up
to date. As of May 23, 2007, the total unpaid ERPs
amount to $43.3 million, which is equivalent to 13
months in arrears.
Assistant Secretary Roberto Lastimoso, general manager
of DOTC-MRT III, explained that ERPs are paid through
the escrow account and government subsidy. “Arrearages
will be paid when there are enough funds on the escrow
account and when the 2007 budget for MRT III subsidy is
released. MRT III cannot assure the updating of ERP
payments since the subsidy for its payment is subject to
approval of budget.”
The DOTC
is also eight months in arrears in paying maintenance
fees for MRT III, amounting to $11.4 million as of May
23, 2007. The administration cost payments are similarly
in arrears for four months, for $166,668. Updating of
these arrearages is contingent on budget approvals.
Because
of these uncertainties in payments and unavailability of
funds under a troubled history of late payments,
PhilRatings is alerting the market with a credit rating
downgrade of MRT III Funding Corporation Ltd.’s
Asset-Backed Notes from PRS Ba to PRS Caa.
PhilRatings is the sole domestic credit ratings agency
accredited by both the Bangko Sentral ng Pilipinas and
the Securities and Exchange Commission. It has over 20
years of experience in providing credit ratings to the
Philippine financial market. |
