Cebu City Mayor Michael Rama wants to pursue a restructuring of the loan for the South Road Properties (SRP) before the year ends.
This developed after the Development Bank of the Philippines (DBP) formally offered Rama a P3-billion local loan with an interest rate of 4.15 percent fixed for five years. The offered loan is also renegotiable for every five years until it expires on 2025.
“I want to discuss with Belinda (Navascues, mayor’s secretary) for a special session to be conducted this year with the councilors on what is to be done, said Rama, who wanted this problem addressed within the year.
He wanted to discuss with the councilors which bank the city will get a loan to pay off what it borrowed for the SRP.
Aside from the DBP, two other banks offered loan proposals with lower interest rates than that of the city’s current loan with the Japan Bank for International Cooperation (Jica), which has an annual interest rate of 11 percent.
The Cebu City government wanted to have a local bank to give them a loan to pay the full amount of the loan to Jica so that the city will just pay the loan in pesos and not in yen to the local bank.
The interested banks are the Philippine National Bank (PNB) and the Land Bank of the Philipines (LBP), which is the conduit bank of the Jica loan for the SRP.
With the DBP offer, the LBP also recently agreed to assume the one percent guaranty fee paid by the city to the Department of Finance (DOF), which is around P50 million a year.
Rama, however, said that LBP’s assumption of the fee won’t give them the upper hand, when the city government will decide on which bank the city will choose for the loan restructuring.
The city government took a 12.315 billion yen loan from the Jica in 1995 to develop the 300-hectare SRP. It will mature in 2025.
At that time, the loan equivalent in peso was P4.65 billion. But until this year, the city’s balance is around P2.91 billion still.
Yearly, the city allocates from P200 million to P300 million to pay the principal loan amount and another P150 million to 200 million for the interest. This can still increase depending on the foreign exchange rates.
“It’s a continuing burden until 2025. It’s the thrust of the mayor that before the year ends, the yen-dollar-peso will become yen-peso,” Rama said.