Tomas Wants ‘To Pay Directly’ ( South Road Properties )

Sun.Star
Tuesday, January 08, 2008

AFTER making the first sale at the South Road Properties (SRP), Cebu City Mayor Tomas Osmeña wants to leave out the National Government and the Land Bank of the Philippines (LBP) from the loan agreement with the Japanese Government.

This is because P200 million of the P500 million the City Government pays for the SRP loan annually goes to the National Government and the LBP, the conduit bank for the loan, he said.

A source at the LBP, however, said that this might not be possible.

Being an Official Development Assistant (ODA) project funded by the Government of Japan, a sovereign guarantee is required.

But Osmeña said he will start negotiating with the Japan Bank for International Cooperation (JBIC) as soon as the City closes a deal with any of the three developers that have submitted proposals to buy or lease SRP lots.

“After our first initial lump sum payment, we will ask to waive the requirements for guarantee fee and if we can pay JBIC directly because out of the P500 million, P200 million is income of the National Government from the loan,” he told reporters yesterday.

The 290-hectare development cost the City 12,291,866,796 yen in foreign loans in 1995. The City has so far paid some P1.5 billion for it and has earned only P25 million from the project.

What the City can do, the mayor said, is to negotiate with JBIC or other creditors in Japan to deal directly with the City so they can do away with guarantee fees paid to the Department of Finance (DOF) and the LBP.

The City will end up paying less every year, he said.

“One of the biggest sources of profit of LBP is the SRP and it’s not even their money that we borrowed, they are only collecting from us for JBIC. I saw it at the beginning, na alkanse gyud ta (we would be at the losing end) but I said that time never mind,” said Osmeña.

“In other words, we can always tell our creditors: Is there a way we don’t have to pay the National Government and we just pay directly to JBIC? Anyway our collateral is there (SRP). But before we do that, we have to show our solvency first,” he said.

But the source clarified that the LBP does not charge the City any guarantee fee. They merely collect the fee and remit it to the DOF.

“If it’s an ODA project, the donor country would always want a sovereign guarantee. The transaction is always between the two governments through their respective government depository banks and in the case of the SRP, it’s the JBIC and the Land Bank,” the source told Sun.Star Cebu.

The source privy to the loan transaction also said that LBP is involved in all ODA project and there is no precedent to what the mayor wants to happen.

Sun.Star also checked with the City Treasurer’s Office and based on their records, only P40 million was paid to the DOF as guarantee fee in 2007.

The DOF collects a guarantee fee of one percent of the total outstanding loan balance for the year.

The Cebu Investments Promotion Center (CIPC), the marketing arm of the SRP, has projected the sale of at least 140 hectares by June, which can yield P8 to P10 billion for the City.

But even if the sale materializes this year and the City is able to get the amount, Osmeña said they do not necessarily have to use the entire amount to pay off the loan even before the 2020 deadline.

“It’s not necessary to pay off the loan in full because we have 20 years to pay it. Once we establish that the financial risk to the City is not so much because the project is moving, then we’ll keep the loan as it is, but without the government collecting P200 million from us,” he said.

In his first news conference after arriving from a two-week holiday in the US, Osmeña said he already has two of the three proposals from major developers.

The proposals are for the purchase of 40 to 50 hectares of land for each buyer, but the mayor said there is so much haggling going on that he has to evaluate the offers further.

“As usual, naay hangyo-hangyo but they’re not touching the prices. Their request is that they want to lease a major property for a mall but they will buy land for a high rise condo... We only have to make one sale and that will take care of the loan payment for a year,” he said.

Osmeña said the City needs only P500 million for debt servicing this year, which they can get from the down payment for the sale of the first 40 hectares.

He further said that he will take time to study the proposals to make sure that all developments at the SRP will be integrated and will create a stronger economy and employment opportunities for the city.

“The minimum proceeds for the three offers is P8 to P10 billion for the 140 hectares if it’s a sale and that’s only one-half of the SRP. So our priority is not to go bankrupt.

We sell at least one, safe na ta (we’re safe). Granting there is no Asian crisis, we’re pretty well settled,” Osmeña said. (LCR)