To partly finance its priority projects (e.g. the Subic-Clark-Tarlac Expressway), the Bases Conversion Development Authority (BCDA) intends to issue P2.0 billion worth of bonds, with a fixed coupon rate, over a 5-year term. The bonds will be offered primarily on a private placement basis to qualified investors. Lead underwriter is the Development Bank of the Philippines.
The proposed bonds mark the first time that BCDA is raising long-term capital from private sources. Although the bonds are exempt securities and are not subject to the registration requirements of the Revised Securities Act, BCDA’s openness to obtaining a credit rating and to go through the credit rating process is in line with the government’s thrust towards greater transparency, disclosure, and good governance, and is in preparation for other issuances which may be pursued over the long-term. At present, BCDA is the only government agency which has obtained a credit rating.
“The proposed bond issue has been rated PRS A,†PhilRatings stated. A rating of PRS A indicates that the bonds “have favorable investment attributes and are considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future.â€
In arriving at the rating, PhilRatings considered the following factors: BCDA’s capability in developing, managing, and disposing vast land holdings; the value of present and prospective leases, joint venture agreements, land sales and potential concession income, as well as planned divestment of certain shareholdings; the company’s healthy capitalization and expected moderate use of debt; substantial financial flexibility, enhanced by the company’s access to low-cost and very long-term Official Development Assistance funds; and management’s demonstrated skills in responding to negative external developments. These factors, however, are balanced against the company’s susceptibility to the cyclical property market which is heavily influenced by uncertainties in the general economy, and potential claims from the national government for BCDA to share a greater portion of its income for other national purposes.
BCDA is the national government’s instrument to convert military bases and camps to profitable civilian uses. At present, operations are focused on creating investment opportunities in Metro Manila and in Central and Northern Luzon.