Metro Pacific Investments Corporation (“MPIC”, PSE: MPI) today reported that the Board of Directors in its regular meeting held today, approved
the Term Sheet between MPIC and First Philippine Holdings Corporation ("First Holdings"), in relation to, amongst other things:
- the provision of a loan in the amount of approximately PhP11.2 billion by MPIC to First Holdings or its designated wholly owned subsidiary (the "Loan"); and
- the agreement of First Holdings to grant to MPIC a call option relating to approximately 74.6 million common shares of Meralco (approximately 6.7% of the total current outstanding common shares of Meralco) (the "Subject Shares") owned by First Holdings (the "Call Option"). The Term Sheet is expressed to be legally binding and enforceable but it is contemplated in the Term Sheet that the parties shall endeavour, in utmost good faith, to sign appropriate documentation in due course.
The Php 11.2 billion Loan
MPIC shall provide a loan in the amount of approximately PhP11.2 billion, to be evidenced by a promissory note ("Note"), to First Holdings or its designated wholly owned subsidiary. It is anticipated that the Loan will be advanced by MPIC and drawn down by First Holdings on or around the 13th November 2009 subject to the execution and delivery of the Note and a pledge over 138,357,600 common shares of First Gen Corporation owned by FGH Cayman and 30,093,270 common shares of Meralco owned by First Holdings Utilities Corporation. The Note will mature on 31 March 2010 and will bear interest at the rate of 5% per annum payable in arrears on maturity of the Note, calculated on the basis of the actual number of days elapsed in a year of 365 days.
The Call Option
First Holdings has also agreed to grant to MPIC the Call Option relating to the Subject Shares owned by First Holdings. The Term Sheet provides that First Holdings shall grant the Call Option not later than 15 January 2010. The Call Option shall be exercisable at any time from the date that the Call Option is granted until midnight on 31 March 2010.
It is expressly stated in the Term Sheet that the rights of MPIC under the Call Option shall be independent of any rights that MPIC may have as lender under the Loan (as described above) and may be exercised by MPIC at its sole option and discretion without regard to the existence or absence of any default under the Loan; provided that the Loan may be assigned by MPIC to First Holdings as payment for part of the purchase price of the Subject Shares in the event (the Call Option is exercised by MPIC while the Loan is still outstanding.
MPIC shall pay to First Holdings (in cash) a distinct consideration for the grant of the Call Option, in an amount to be determined using the Black-Scholes option pricing model. The exercise price is Php 300 per Subject Share. The Term Sheet provides that the exercise of the Call Option by MPIC shall be subject to any appropriate corporate approvals being obtained. The Term Sheet provides for the Subject Shares to be held in escrow by an escrow agent mutually agreed by MPIC and First Holdings, pending the exercise of the Call Option. If the Call Option is not exercised prior to 31 March 2010, the escrow arrangement will terminate and the stock certificates representing the Subject Shares will be returned to First Holdings. First Holdings shall not sell, alienate, transfer, encumber or create any lien or charge on, or any security interest in, the Subject Shares during the period that the Call Option is exercisable by MPIC.
The Term Sheet, which contemplates, amongst other matters, the commitment from First Holdings to grant to MPIC the Call Option, provides MPIC the ability to acquire a strategic equity interest in Meralco. It is anticipated that such strategic interest will complement MPIC's existing investment in the toll road and water sectors represented by controlling interests in Manila North Tollways Corporation and Maynilad Water Services, Inc., respectively.
Issuance of Fixed Rate Corporate Notes
The Board authorized the issuance by MPIC of up to PhP12 Billion 9-Year Fixed Rate Corporate Notes, in one or more tranches, to Primary Institutional Lenders. Said Notes will be secured by a pledge over a total of 163,602,961 Meralco shares owned by MPIC. In connection with said Notes issuance, MPIC is appointing First Metro Investment Corporation and PNB Capital & Investment Corporation as joint issue managers and joint lead underwriters, Metropolitan Bank & Trust Company – Trust as facility agent, paying agent, and debt service account agent and Philippine National Bank – Trust Banking Group as collateral trustee.
A Significant Stake in Meralco
“As MPIC intended, the 6.7% purchase agreement with First Holdings reflects our goal to be a significant shareholder of Meralco” said MPIC President & CEO Jose Ma. K. Lim.
“As a strategic shareholder with appropriate board and management participation, this agreement will enable the realization of synergies within the whole group ” Mr. Lim added.
“Taking into consideration Meralco’s strong financial prospects, we are confident that this transaction secures our objective in adding another valuable core business to MPIC’s portfolio and in strengthening our position as a dominant player in the country’s infrastructure industry” said MPIC Chairman Manuel V. Pangilinan.
source: MPI Press Release/Disclosure to Philippine Stock Exchange
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