DBP, Landbank to sell part of controlling stake in MRT-3

MANILA, Philippines - State-run Development Bank of the Philippines (DBP) and Land Bank of the Philippines will sell part of their controlling stake in the 17-kilometer MRT 3 along EDSA, reportedly worth $400 million, by yearend.

“It will be finalized before the end of the year,” said Reynaldo G. David, DBP president and chief executive officer. Landbank and DBP are the two government financial institutions (GFIs) that control 75 percent of MRT 3 valued at about $679 million.

Another state-run entity, the National Development Corp. (NDC), will acquire the 75-percent stake in MRT 3 by issuing government bonds with sovereign guarantees as payment. The GFIs expect the sovereign bond deal to fetch returns of at least seven percent.

“Compared to estimated government losses of 15 percent, it would still result in savings for the government and reasonable profits for the GFIs,” David said.

Government is spending $130 million per year for equity rental payments, maintenance rental payments, and operating and administrative costs for the elevated railway, compare to annual revenues of $39.56 million.

The NDC will, inturn, look for a buyer from the private sector but will likely to borrow money first prior to the issuance of the bonds.

The GFIs are required to sell their holdings in MRT 3 within the year.

Both the Department of Finance and the Bangko Sentral ng Pilipinas (BSP) reminded Landbank and DBP that government should not place a large portion of its investible funds in one venture that may not give returns in a short period, may end up at a loss, or compete with the private sector.

Finance officials said another option, if government fails to privatize MRT 3, is to raise the MRT 3 fares.

Based on a government study presented by the DBP, fares should be increased from an average rate of P12.50 to P60.50 to remain profitable.  — Ted Torres