Miayaza Proceeds Coming In

The Journal

Wednesday, December 23, 1998

THE GOVERNMENT is expecting some $2 billion worth of concessional financing from Japan before the end of the year, according to Finance Secre¬tary Edgardo B. Espiritu.

Also known as “soft loans" because they carry lower than market interest rates, the loans will come from the $30-billion Miyazawa fund, Espiritu said.

He told reporters that of the total, nothing was earmarked as equity infu¬sion to the Philippine Airlines which needs at least $150 billion to become viable.

He said such a loan was still possible but only if the conditions required by Japan could be met, including an approval by the Philippine Securities and Exchange Commission of a rehabilitation plan for PAL by its majority owner Lucio Tan

An earlier rehabilitation plan submitted to the SEC by the airline was rejected by its major creditors and leasers citing the lack of a strategic partner to ensure the rehab plan will work, Espiritu said of the objec¬tions.

Such a strategic partner was considered "of paramount importance" by the creditors and leasers without which no rehab plan is deemed possible, he said.

Espiritu earlier proposed a two-step funding scheme for PAL In which government financial institutions will tap the Japan Export-Import Bank for a loan sourced from the $30 billion Miyazawa fund.

The GFI’s will use proceeds from the Jeximbank loan to invest in PAL after which they were supposed to sell back their holdings years later under a planned public offering, Espiritu said.

Under the scheme, government will still be able to honor its privatization commitments since the GFI’s investments will only be for the duration allowing PAL to recover financial strength and when the shares shall have appreciated in value, Espiritu explained.

He said the $2 billion from the Miyazawa fund include not only co-financing from Jeximbank but also from its Overseas Economic Cooperation Fund.

OECF was earlier tapped to co-finance program loans from the World Bank and the Asian Development Bank, Espiritu said.

Proceeds from such loans are expected only after March of April and this was why government plans to in¬dependently finance the requirements via a proposed currency swap with Japan, Espiritu said.