Landbank agrees to defer loan payment to Aug. 20
The Cebu City government may pay the amortization for the South Road Properties (SRP) loan on Aug. 20, instead of Feb. 20, but will have to pay certain charges.
The Feb. 20 payable, around 440 million yen or P173 million, plus the charges will also be earmarked against the city government’s deposit account with the bank.
“We are pleased to inform you that Land Bank of the Philippines has approved your application for deferment of amortization payment in the amount of P173 million (peso equivalent) as follows: from February 20, 2016 to August 20, 2016,” Land Bank-Cebu Lending Center Vice President Elsie Fe Tagupa told Mayor Michael Rama in a letter dated Feb. 16.
The letter did not specify what the charges amount to.
Rama, however, said in a press conference yesterday that the city won’t incur penalties and interest if it won’t be able to pay the amortization due this Saturday.
“God is good all the time and all the time God is good. If payment is deferred, we don’t talk about that in the meantime. All the statements of my opponent about (the city) being in trouble, at risk, it is a figment of their imagination. It is a matter of bringing the truth. So I brought them the truth,” Rama said.
The mayor said he asked for the deferment of the loan payment because of the “political skirmishes” at the City Hall. Rama has been pushing for the prepayment of the estimated P2.4-billion loan balance while the city council, which is dominated by councilors affiliated with the Bando Osmeña–Pundok Kauswagan (BO-PK), wants to continue paying the amortizations as they fall due until the loan matures in 2025.
The council shelved Supplemental Budget (SB) 1, which contained the allocation for the P2.4-billion prepayment, because it was going to be sourced from the proceeds of the sale of SRP lots. A case questioning the validity of the sale is still on appeal in court.
In a separate press conference, former mayor Tomas Osmeña welcomed the deferment of the amortization payment.
“That’s very good. He’s no longer mayor at that time. Ako ra’y bayad ana sa (I will pay the) amortization,” Osmeña said.
Osmeña is challenging the reelection bid of Rama. The elections will be held on May 9.
While challenging the Land Bank to call or demand full payment of the loan, Rama quietly asked Land Bank and the Japan International Cooperation Agency (JICA) to defer the Feb. 20 amortization schedule.
The mayor said both Land Bank and JICA officials have verbally agreed, with Land Bank sealing the agreement in its Feb. 16 letter. Rama said he expects to receive a formal communication from JICA as well.
JICA extended a 12.315-billion yen loan for the 330-hectare south reclamation project to Land Bank in 1995. Land Bank and the Cebu City government signed a sub-loan agreement in March 1996.
The mayor said he sent letters to both Land Bank and JICA two weeks ago.
Two Fridays ago, he said he went to Manila to personally talk with Land Bank president Gilda Pico regarding his request to defer the payment. He said he was asked by Land Bank to also get the concurrence of the JICA so that the bank won’t be declared in default by JICA.
Rama said he went to the JICA office in Manila last Monday and explained to Tetsuya Yamada, JICA director of Central Asia, the situation. JICA Philippines Chief Representative Noriaki Niwa was out of office.
“(I told him) in view of the fact that had it not been for political skirmishes, it (loan) would have already been paid last year. Why? All the requirements that were asked for the pre-termination of the loan were complied with,” he said.
The city government earlier secured concurrences from the Bangko Sentral ng Pilipinas, Department of Finance and Land Bank.
Based on the billing statement sent by Land Bank earlier, the city needs to pay by Feb. 20 around 440 million yen, broken down as 299.8 million yen for the principal loan and 140 million yen for the interest.
The same billing statement showed that the city has to pay on Aug. 20 this year 431.9 million yen, which includes 299.8 million yen for the principal loan amount and 132 million yen for the interest.
At City Hall yesterday, the councilors continued to debate on how to pay the SRP loan during their regular session.
Councilor Gerardo Carillo, a former BO-PK member who switched to Team Rama, said in a privilege speech that the loan should be prepaid because it’s the contractual obligation of the city government.
He cited the provision that prohibits City Hall from selling the entire 330-hectare SRP.
“But, as the need arises, the City may sell or dispose said property as long as JICA will be paid in full if the city intends to sell more than 51 percent of the entire SRP,” Carillo said.
He added that the contract states that if more than 51 percent has been disposed of, the proceeds from the sale should be used to pay off the loan.
Councilor Margaret Osmeña of BO-PK, who chairs the budget and finance committee, countered Carillo’s argument.
“I think we should focus on paying off the amortization first, since this was what is being demanded, and is more urgent. No one is telling us to pay off the entire loan yet, and not even Land Bank is demanding us on the terms Councilor Carillo is discussing,” Osmeña said.
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