MRT Buyout in the Point of View of APO

According to APO’s SEC filings, APO has an 18.90% interest in Metro Rail Transit Holdings Inc. (MRTHI). MRTHI has 84.90% interest in MRT Holdings II (MRTH II) which in turn owns 100% of Metro Rail Transit Corp. (MRTC). [1]

In 2001, APO entered into a Sale Agreement with TBS Kappitel Corporation Pte. Ltd (TBS) to sell future cash flows from the MRT 3 project in exchange for bonds. [2] This process is called securitization.


In October 2003, APO participated in the secondary offering of MRT bonds where APO received $3 million, $4 million, and $5.253 million from the sale of series 1 MRT bonds on Nov. 2003, Feb. 2004, and May 2004 respectively. In October 2004, APO sold an additional series 2A MRT bonds for $4.091 million. APO2

The transaction illustrated above will not entitle APO to receive future cash flows from the current MRT project but APO still has the right to receive cash flows should MRT expand its operations. [3] In 2009, MPI exploited this loophole and entered into a cooperation agreement with APO where MPI made P89 million deposit. The cooperation agreement will assign the rights and interest of APO to MPI but it does not mean the sale of APO’s interest in MRTHI. The interests assigned to MPI will not generate cash flows unless the MRT project will be expanded.

In December 2012, the Government through the Department of Transportation and Communications (DOTC) announced their intention to gain full control of the MRT for $1 B. Majority of the $1 B will be used to retire the MRT bonds. Currently, Development Bank of the Philippines (DBP) owns MRT bonds with a face value of $676.25 million [4] and Land Bank of the Philippines (LBP) owns $7.649 face value. [5]

MRT project is a build-operate-transfer agreement with the Government for 25 years since 1997 with the investors guaranteed with 15% return on investments (ROI).


Should the DOTC buyout the private investors and retire the MRT Bonds, the DOTC will no longer be liable to any party. However, is the $1 Billion enough to buyout the investors?


To buyout LBP and DBP alone, the Government needs $1.2 billion. According to Section 7 of RA 6957 [6], the Government is required to compensate the investors all the expenses incurred in the project plus a reasonable rate of return but not exceeding the agreed ROI.

Unless the Government will revise their budget for their buyout plan, APO may only have marginal gains in the buyout and MPI may be in a very unfavorable position.


  1. APO Letter to stockholders,
  2. APO Sec 17A 2005, Note 6
  3. MPI Annual Report 2011, Message from the Chairman, p. 12,
  4. DBP 2010 Notes to Financial Statements, Note 5, p. 16,
  5. LBP Notes to Financial Statements, Note 12, p. 15,
  6. Build Operate Transfer Law,

Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell.

2 thoughts on “MRT Buyout in the Point of View of APO

  1. Galing ng analysis…follow up question, in case Government revised thier budget to compensate investor up agreed ROI, will MPI be able to recover the P89M deposit with APO? Can I share your analysis? Thanks!

    • Should the DOTC conform their budget with the Build Operate transfer law, MPI may gain not more than 15%. MPI advanced a total of P462 million to other MRTC shareholders (including APO) for the Cooperative Agreement.

      Thank you for the kind words. 🙂


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