MVP unit in P6.8B Coastal Road deal
Businessman Manuel V. Pangilinan is set to make a significant investment in the holding firm that owns the Coastal Road project connecting Metro Manila with the province of Cavite—a move that may eventually give the telecommunications tycoon control of the toll highway.
The deal is worth an estimated P6.8 billion and is slightly higher than the outstanding obligations of Cavitex Infrastructure Corp. (formerly UEM Mara Philippines Corp.), the operator of what is officially known as the Cavite Toll Expressway project.
Cavitex is headed by businessman Luis Virata, who started the project at the height of the 1990s economic boom in partnership with Malaysian conglomerate UEM Berhad. The project struggled to meet vehicular traffic forecasts since the outbreak of the East Asian financial crisis in 1997, but recently completed a major expansion project that saw the road extended to Kawit, Cavite, in 2011.
The Inquirer learned that the deal would involve the holding firm of the Coastal Road operator issuing convertible bonds to Pangilinan’s toll road firm, Metro Pacific Tollways Corp. The bonds will be convertible to non-voting preferred shares in the holding firm, but can also be redeemed by Cavitex.
“This is a bond, so Pangilinan’s group will basically be lending money to Coastal Road,” said a source who declined to be identified. “Ownership and day-to-day control of operations will remain with Virata’s group. Metro Pacific will provide management assistance, given their experience with other toll projects.”
The source said that Pangilinan and Virata agreed on the deal earlier this week, while the formal signing was set for next week. The agreement also comes more than three years after talks began between both camps for the Pangilinan group to invest in the Virata’s toll road project.
The new funds may be used to fund Cavitex’ further expansion to meet the growing volume of vehicular traffic moving between Metro Manila and its southern environs each day.
Once completed, Cavitex will have a total length of 21 kilometers and is expected to cut travel time between Manila and Cavite to 30 minutes. As many as 80,000 vehicles use Coastal Road on peak days.
Last April, the parent firm of the Coastal Road tollway operator sold 30 percent of its stocks to a group of foreign investors at the same time when it retired its pricey debt financing scheme. Coastal Road Corp. sold 30 percent of its stocks to Thornhedge Equity Investments, an investment company representing a group of New York-based private equity investors.
At that time, it was said that Thornhedge would participate directly in CRC’s reclamation and other infrastructure projects. Thornhedge was advised on this transaction by TAP Advisors, a New York boutique investment bank. CRC is the parent firm of Cavitex.
At the time of the deal, Cavitex Finance Corp., a Cayman Islands-registered special purpose company, projected that its profitability would improve significantly with the completion of its tender offer to purchase bonds issued by Manila Cavite Toll Road Finance Corp.