US$365-M corporate notes to fund Maynilad's 5-year water service improvement plan

MAYNILAD Water Services, Inc. has signed a 10-year corporate notes issue worth $365 million with lead underwriters BDO Capital & Investment Corp. and Development Bank of the Philippines. This will partially fund Maynilad's program to rehabilitate the pipe network throughout the West Zone and significantly reduce system losses by 2012.

“The signing of Maynilad's $365 million notes facility is a cause for celebration not only for the company but more so for our over 6.2 million customers and additional 3 million waiting for our service,” Maynilad president Rogelio Singson said during the formal signing of the corporate notes issue held at the Shangri-la Hotel, Makati, last July 11, 2008.

Maynilad's five-year plan involves replacing old pipes and constructing new water facilities to provide 24-hours water supply at 7-psi pressure to 100% of the West Concession by 2012.

“We forged this partnership because the market and we, the noteholders, acknowledge the competence and the business direction that Maynilad is taking now. As you know, confidence in a company starts with its management—the direction it's pursuing and its ability to execute. This is a testimony to what Maynilad, DMCI and MPIC have accomplished,” Banco de Oro Unibank, Inc. president Nestor Tan said.

Singson highlighted during the signing ceremonies that Maynilad has budgeted P5 billion in 2007 and P8 billion this year for its Capital Expenditure projects. Maynilad's five-year CAPEX program until 2012 is pegged at P40 billion.

“We are indeed fortunate to be part and instrumental in this very important endeavor to provide water to Filipinos,” DBP president Reynaldo David said.

Besides beefing up the investment for total pipe rehabilitation and network expansion projects lined up in the next five years, part of the corporate notes proceeds will go to a more focused and aggressive program that Maynilad has launched to bring down Non-Revenue Water (or unbilled water due to leaks and illegal connections) from its current level of 66% to 40% or lower.

A major component of Maynilad's NRW Program is the reconfiguration of its existing pipe network into 36 smaller Hydraulic Areas for better supply management and more efficient network troubleshooting, as each HA will only have a single entry and outflow point.

“With the full commitment of Maynilad's new owners, we can now say that we fully understand what has to be done to ensure that our Non-Revenue Water significantly improves and that we can give customers the service they deserve,” Singson assured.

The company almost shut down four years ago after it was hit hard by the 1998 Asian financial crisis, which eventually forced former owners Lopez Group to file for corporate rehabilitation and give up its controlling stake in the company in 2005. In 2007, a consortium made up of DMCI Holdings and MPIC took over the water concessionaire, bringing in fresh investment and facilitating the company's swift exit from rehabilitation. After Maynilad regained good financial health and successfully got out of rehab, the company was welcomed back to the credit company, allowing it access to less expensive forms of financing for its water supply improvement projects.

Maynilad's $365 million corporate notes facility is made up of two series: the first is the peso-denominated $240 million series, the second pending approval from Bangko Sentral ng Pilipinas is the $125 million dollar-denominated series.

“We thank our bankers in their trust in the new Maynilad. We're still a long way to go to fully service our estimated 9 million customers as we are only right now at 71% coverage. But we're going there. If last year we are optimistic and hopeful about our outlook, now we are very confident that we can achieve success sooner than later,” Singson added.

Maynilad, BDO and DBP top executives sign the $365 million 10-year Corporate Notes Issue, which will partially fund the water concessionaire's 5-year program aimed at significantly improving service levels and reducing physical losses in the West Zone. Photo shows (from left) DBP CEO Reynaldo David, DMCI Holdings, Inc. CEO Isidro Consunji, Maynilad president Rogelio Singson, MPIC chairman Manuel Pangilinan, BDO president Nestor Tan, and DBP VP Armando Samia.

Ed Francisco (left), President of BDO Capital, emcees the formal signing of the $365 million 10-year Corporate Notes Issue by top executives of Maynilad, BDO and DBP, which will partially fund the water concessionaire's 5-year program aimed at significantly improving service levels and reducing physical losses in the West Zone.