The operator of the Manila Cavite Toll Expressway Project, or Coastal Road, has offered to buy back its “junk” bonds held by foreign and local investors, which were issued to fund the construction of the toll road extension to Kawit, Cavite.
In a statement, Manila Cavite Toll Road Finance Co. said its affiliate, Cavitex Finance Corp., would hold a tender offer for the bonds issued by the former.
About $160 million worth of these bonds are held by investors. The securities are maturing in 2022 and have a yield of 12 percent yearly.
“The total consideration for each $1,000 principal outstanding amount of notes validly tendered and not withdrawn pursuant to the offer is the price equal to $1,000 plus accrued and unpaid interest from the last payment date to, but not including, the settlement date,” the group said in a press release.
Bond holders who accept the tender offer would also get an “early tender premium” for every $1,000 worth of bonds they hold. The tender offer period that started on Monday will end on March 31, 2012.
UEM Mara Philippines Corp., which owns Manila Cavite Toll Road Finance and Cavitex Finance, said the tender offer was conditioned on at least 90 percent of all bond holders agreeing to sell their holdings ahead of maturity.
Bank of America-Merrill Lynch was appointed transaction’s manager.
UEM Mara holds the concession for the Coastal Road, which originally ran from Roxas Boulevard to Bacoor, Cavite. Last year, the company opened a new section extending the road to Kawit, Cavite.
Unfortunately, due to several factors that include bad weather and pipe-laying works of Maynilad Water in the area, traffic at the new extension has not reached the projected levels.
Global debt watcher Moody’s Investor Service said the 9,000-10,000 vehicles/day that used the toll road from May to July was much lower than the original forecast of 47,000 vehicles a day.
This prompted a downgrade in the ratings of the UEM bonds to Caa1, which is below investment grade, from B2. The downgrade also led to the resignation of UEM Mara president Jennifer Bote.