MRT asset-backed notes get upgrade

MANILA, Philippines - The Philippine Rating Services Corp. (PhilRatings) has upgraded the rating for tranche 3 of MRT Funding Corp.’s asset-backed notes by a notch to PRS Aa minus from PRS A plus.  

The rating took into account Philratings’ full and prompt monthly payments on the notes’ principal and interest, beginning Sept.8, 2014 to Feb. 7, 2017. 

The asset-backed notes issue is a securitization of future dividends from Metro Rail Transit Corp. (MRTC), which flow through a series of holding companies and special purpose vehicles, to MRT III Funding Corp., the issuer of the notes.   

The dividends arise from equity rental payments  made by the Department of Transportation and Communications  to MRTC under a 25-year build-lease-transfer agreement for the construction of the Light Rail Transit System, phase 1  in Metro Manila.  

Obligations rated PRS Aa are of high quality, and are subject to very low credit risk.  The obligor’s capacity to meet its financial commitment on the obligation is very strong.  The “minus” further qualifies the rating. 

The tranche 3 notes are deferred pass-through notes.  Principal amortization of and interest payments for the tranche 3 notes have been deferred, to start on Sept. 8, 2014 and will end on Feb. 7, 2025.

The payments just pass through MRTC, and are immediately distributed by the trustee (Bank of New York Mellon) to all note holders through its paying agent (Bank of New York Mellon-Singapore). 

Unlike tranches 1 and 2 which called for a single balloon payment of the notes upon maturity, the full and prompt debt servicing of the tranche 3 notes has resulted in a gradual decline of the notes’ outstanding principal, thus reducing repayment risk in relation to the tranche 3 notes.  

Additionally, PhilRatings notes the pattern of regular payments for the tranche 3 notes has continued, despite the recent change in government administration.  

“As of rating report date, however, uncertainties on the latter remain, as there is still considerable room for policy changes by the newly-installed administration,” Philratings said.