MRTC notes get top PhilRating grade

Philippine Rating Services Corp. (PhilRatings) announced the upgrade of issue ratings assigned to MRT III Funding Corp.’s asset-backed notes.

Philratings said the debt was upgraded from PRS A to PRS Aa for tranche 2-G, and from PRS A to PRS A plus for tranche 3.

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

Tranche 2-G, amounting to $100.884 million, is seen to have minimal risk of non-payment as of rating review date.  As of June 19, 2014, the balance of the account kept by MRT III Funding Corp. with Bank of New York Mellon (BoNY Mellon), the trustee for the notes, stood at $107.033 million.

PhilRatings notes that said amount was more than sufficient for the $100.884 million principal repayment of tranche 2-G due on Aug. 7, 2014.

The rating for tranche 3 has also been upgraded based on punctual repayment history of note tranches that have already matured, notwithstanding the previous delays in equity rental payments (ERPs) remittance by the government. Such repayment history helps temper uncertainty risks for the period 2014 to 2025, including risks that may arise from a change in government administration by 2016.

The dividends arise from ERPs 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 (LRTS Phase 1, or MRT) in Metro Manila.

PhilRatings’ analyses are based on available information at the time that the rating review was done. PhilRatings said it would continuously monitor developments relating to the MRT III transaction and may change the ratings at any time, should circumstances warrant a change.

A PRS Aa rating is defined as one where “obligations of high quality and subject to very low credit risk. The obligor’s capacity to meet its financial commitment on the obligation is very strong.”

A PRS A rating represents “favorable investment attributes and are considered as upper-medium grade obligations, but are more susceptible to adverse changes.’’ Miguel R. Camus