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We don’t take out loans larger than project costs—Megawide Construction Corp.

12:01 AM March 03, 2015

This refers to Conrado R. Banal III’s article titled “Mystery loves company” (Business, 2/26/15).

As a publicly listed company, Megawide Construction Corp. (Megawide) feels the need to correct the many inaccuracies that Banal passed off as facts.

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“A pattern thus emerged: The Megawide group arranged loans much bigger than the project costs, such as the P23.3-billion loan for the P17.5-billion Cebu airport, or the P2.9-billion loan from government banks for the P2.5-billion bus depot,” Banal said.

  1. Megawide and its affiliates do not take out loans in amounts larger than project costs.
  • On the PPP for School Infrastructure Project (PSIP) 1 under the Department of Education, the total cost is P12.8 billion while the total debt availed of from domestic banks is only P6.5 billion.
  • As to the modernization of the Philippine Orthopedic Center project, the total cost is P5.7 billion while the total debt availed of from domestic banks is only P2.9 billion.
  • Regarding the Mactan-Cebu International Airport project, the total cost is actually P34 billion. The total project cost necessarily includes the bid premium already paid to the government (P16.13 billion, inclusive of value-added tax). For a P34-billion project, we availed of a loan from syndicated banks amounting to only P23.3 billion.
  1. Banal said that the consortium and, in particular, GMR Infrastructure, may be financially troubled. It is significant to note that the consortium joint-venture company, formed between Megawide and GMR, has already paid from its own internal sources the amount of P4.8 billion as its own equity and has not simply borrowed to fund this project.
  2. On the Intermodal Transport System-Southwest Terminal project, the total cost is actually P3.27 billion. At present, this project is still in the process of achieving financial closure, and no bank has agreed to lend for this project yet.
  3. Aside from these glaring inaccuracies, we would also like to stress that all concession agreements on public-private partnership (PPP) projects require the infusion of equity of at least 30 percent of the project cost because such projects cannot be funded solely on debt. Hence, Megawide and its affiliates are required to put in capital for the implementation of all the aforementioned projects.
  4. Banal also said that “the group already asked the Securities and Exchange Commission (SEC) for license to issue P10 billion worth of preferred shares.” The fact: Megawide sought to offer a maximum of only P7 billion in preferred shares to the public late last year, but chose to only offer P4 billion as it believed that this was sufficient to fund its projects. Such issuance was already approved by the SEC and the Philippine Stock Exchange. The fact that these regulators approved such public offer means they believed that the offer was a sound one for the investing public. At present, we are not seeking to raise any additional funds through preferred shares.
  1. At the end of the article, Banal stated that “bankers noted that the Megawide group never provided financial statements on its website (I checked and they were right).” False. The financial statements of Megawide, which are integrated in SEC forms 17-A and 17-Q, are accessible to the general public through our website at www.megawide.com.ph/disclosures.html.

Banal asked: “And so who are the mysterious investors behind Citicore?” referring to the parent company of Megawide. No mystery there; this information is readily available with the SEC.

—MICHAEL C. COSIQUIEN,

chair and chief executive officer,

Megawide Construction Corp.

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TAGS: conrado r. banal III, letters, Megawide Construction Corp., project loans
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