By Chino S. Leyco Reporter

THE local unit of Hong Kong-based First Pacific Co. Ltd. plans to borrow money to finance its purchase of additional shares in Manila Electric Co. (Meralco) from the Lopez group.

In a disclosure to the Philippine Stock Exchange, Metro Pacific Investments Corp. (MPIC) said it intends to issue P12-billion worth of nine-year fixed rate corporate notes in “one or more tranches” to primary institutional lenders.

On late Thursday, Elpidio Ibañez, First Philippine Holdings president, said the Lopez holding company would sell another 6.7-percent stake in the country’s largest power distributor to MPIC, cementing the First Pacific group’s control over Meralco. Besides MPIC, First Pacific also controls Philippine Long Distance Telephone Co. (PLDT).

MPIC is appointing First Metro Investment Corp. and PNB Capital and Investment Corp. as joint issue managers and lead underwriters, Metropolitan Bank and Trust Co.—Trust as facility agent, paying agent, and debt service account agent, and Philippine National Bank—Trust Banking Group as collateral trustee.
First Holdings on Thursday agreed to sell half, or 6.7 percent of its remaining 13.4-percent stake in Meralco to MPIC for P300 apiece, for a P22.4-billion acquisition cost.

MPIC exercised its right-of-first-refusal on the Lopezes’ stake in Meralco and matched the offer of Triratna Holdings Corp., a company led by a son of mall tycoon Henry Sy, and allied with San Miguel Corp. (SMC).

Under their agreement, MPIC will first lend First Holdings P11.2 billion, or half of the acquisition cost at an interest rate of 5 percent per annum. The deal also provides MPIC a call option on the 74.7 million Meralco shares, which the First Pacific unit can exercise on or before the end of March next year

“Those are two separate transactions. We’ll pay the loan, when they exercise the call option. The main things we would like to do is of course to reduce our debts and then make strategic investments,” Ibañez told reporters.

First Holdings has P12 billion in debt maturing soon.

Ibañez said part of the proceeds from the MPIC loan would be spent in “putting in an additional P10-billion investment in First Gen [Corp.] and possibly another $20 million in our manufacturing [unit]. The executive was referring to First Philec Solar Corp., which has a joint venture with US-based solar cell-maker Sun Power.

First Holdings’ shares fell 3.44 percent to P56 while Meralco shares suffered a 12.2-percent drop to P194 apiece after the Lopez group sealed the deal with MPIC.