MPIC to tap bond market with up to P30-B offering over 3 years

“Some of that (funding) will come from equity partners, some from equity financing, about P90 billion will come from MPIC itself,” Nicol said, noting that for next year alone, funding commitment from MPIC was estimated at P30 billion.

The prospective bond offer and the initial public offering of the hospital group will also contribute to the group’s fundraising.

The group has started talking with credit rating agencies for the proposed bond offer, Nicol said.

“We have a triple A rating, we didn’t issue bonds but we’ve reached a point when the level of bank debt in the projects that we’re taking on are necessarily stripping the ability of the banking system so it’s about time we started raising funds from the capital market,” Nicol said.

Banks operating in the Philippines are barred from providing to any single borrower loans, credit accommodations and guarantees exceeding 25 percent of that bank’s net worth.

For MPIC’s bond debut, Nicol said the plan would be to file with the Securities and Exchange Commission a shelf registration plan for P30 billion worth of bonds, to give the group flexibility in fundraising in the years ahead.

“But I don’t think we have to draw more than P10 billion of that next year,” Nicol said.

The shelf registration window of the SEC allows issuers to register and sell under the same prospectus and other regulatory filing requirements a certain volume of securities that the company does not intend to use up right away. In the event that the oversubscription option is not fully exercised, the unused portion will be made part of the remaining bonds in the shelf to be used within a three-year period.

For any more future fundraising, Nicol said that the group would not go to the capital market to raise equity at the MPIC level. Instead, he said the strategy would be to pare interest at the operating level of the companies.

For instance, he noted the group’s plan to bring in a new investor to Maynilad Water Services. But he noted that the process had lagged “because resolution at the regulatory issue has taken a while,” referring to the tariff dispute with the government which had already been decided by the arbitration court in favor of the water concessionaire but yet to be implemented. Since this process is coming to a close, he said the group was moving closer to a selldown of Maynilad shares.

Looking forward, Nicol said the big shift in the group’s business mix would be an increase in the net contribution of the toll road business to 34 percent from 23 percent at present, with the opening of new large-scale projects like the North-South Luzon connector road, Cebu Cordova bridge and the Cavite-Laguna expressway.

“There’s a very significant underlying shift in business from power to toll roads,” he said.

However, Nicol noted that all these toll road projects would have significant start-up losses because of the amortization of concession fees alongside interest and depreciation costs. The projected 34 percent contribution of the toll road business will thus be net of combined start-up losses amounting to around P3 billion annually, Nicol said.

While these start-up losses are significant, he noted that these would “lay down the foundation for our future growth.”