Standard Chartered extends financing to BF Group

British bank Standard Chartered has agreed to provide financial muscle to engineering and construction firm BF Group of businessman Bayani Fernando, which bagged a P3.44-billion school infrastructure project under the government’s public-private partnership (PPP) framework.

In a statement on Monday, Stanchart said it had signed a financing agreement with BF unit Bright Future Educational Facilities Inc (BFEFI), for its school building project awarded by the government in October 2012 under contract package A of the PPP for School Infrastructure Project Phase 1 (PSIP1).

The project is ongoing and expected to be completed in April 2014.

Stanchart said it had developed an innovative solution for BFEFI by integrating a working capital loan with a finance facility for receivables, thereby allowing BFEFI to “achieve capital optimization and effective risk management.”

It said the solution was the “first of its kind” in the industry.

The structured solution, unlike a typical term loan for long-term construction projects, enabled BFEFI to monetize its receivables by selling its receivables to Standard Chartered, allowing the company to maintain acceptable indebtedness ratios to pursue other investments while funding the existing project.

However, a bank spokesperson said Stanchart isn’t buying all of the P3.44 billion in receivables, just a “substantial” portion of it.

The BF Group won the build-lease-transfer contract for school infrastructure (package A) for Region 1 with an annual lease payment cost to the Department of Education of about P344.6 million a year for 10 years.

The group’s project is thus worth P3.44 billion payable over 10 years, involving the building of 2,157 classrooms.

“We are contractors not developers and we like to keep the age of our receivables to less than 90 days. But in this project, our client will be leasing the school classrooms we construct for 10 years and will pay the lease quarterly. Standard Chartered’s unique solution to purchase our lease receivables each time we complete a sub-project allowed us to keep the aging of our receivables to less than 60 days,” said Tala Fernando, corporate secretary of BFEFI.

“We are really happy to work with the Department of Education and Standard Chartered Bank in helping making a significant impact on improving education infrastructure in this nation building project,” she added.