2016 corporate profile.pdf
TRANSCRIPT
CORPORATE PROFILE
LGU GUARANTEE CORPORATION Your link to progress.
Unit 2801, 28/F Antel Corporate Centre, 121 Valero St., Salcedo Village, Makati City | Trunkline: 751-8764 to 68 | Fax No.: 888-4217
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The LGU Guarantee Corporation or LGUGC is the first private corporation to go into the financial
guarantee business in the Philippines. It is the recognized private sector link in public-private partnerships (PPPs) for local development financing, and is in fact one of the most successful models of PPP in the country. Anchored on good governance values, LGUGC mobilizes the
resources of private sector financial institutions toward funding local development projects. LGUGC was incorporated in March 1998 with the primary mandate of granting local government
units (LGUs) access to private sources of capital by providing credit enhancement to LGU debts. This facilitated the entry of LGUs with development projects in the capital market.
LGUGC has since extended its guarantee services to water districts (WDs), electric cooperatives (ECs), state universities and colleges (SUCs), renewable energy technology providers (RETPs)
and medium and large enterprises (MLEs) in infrastructure development and support business.
With proven track record for almost two decades, LGUGC is the name to trust in the Philippine financial guarantee business.
LGUGC’s major stockholders are the Bankers Association of the Philippines in trust for 14 investor commercial banks (45.5%) and Development Bank of the Philippines (45.8%).
The company has an authorized capital stock of PhP500 million of which PhP297,587,500 are
subscribed and outstanding. As of December 31, 2015, total stockholder’s equity amounts to
PhP533.072 million.
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Ms. Lydia N. Orial President/CEO
Lorenzo V. Tan Chairman
Gil A. Buenaventura
Vice Chairman
Antonio S. Abacan, Jr. Director/Treasurer/Secretary
Cezar P. Consing
Director
Alberto S. Villarosa Director
Benel D. Lagua
Director
Ma. Teresa M. Jesudason Director
Lilia G. Baun
Director
Lydia N. Orial Director/President/CEO
Deogracias N. Vistan Cesar E.A. Virata Peter B. Favila Tirso D. Antiporda, Jr. Renato T. De Guzman Leonilo G. Coronel Alfredo C. Antonio Francisco F. Del Rosario, Jr. Ruben O. Fruto Cesar M. Drilon, Jr. Palermo L. Soriano
BOARD OF DIRECTORS (2015-2016)
INCORPORATORS
PRIMARY BUSINESS CONTACT
Phone: (02) 845-3386 | Fax: 888-4217 | Email: [email protected] / [email protected]
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“To be the recognized private sector link in public private partnerships for
local development financing”
Advocate for policy reforms that will mobilize resources of the private sector
toward financing local development projects
Continue to advocate for policy reforms for LGU debts, whether bond
floatation or direct loans
Instill values of good governance to enhance borrowers’
enterprise management and creditworthiness, especially local governments
and utility companies
We believe that the key to strong national economy is local development
We commit to stimulate private sector participation in local development
through credit enhancement and capacity building
We uphold the values of integrity and professionalism in the conduct of our
business with the public we serve and in the prudent management of
resources entrusted to us
VISION
MISSIONS
CREDO
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LGUGC is a pioneering institution, the first to
introduce a guarantee mechanism for local government unit (LGU) borrowings and the first private corporation to go into the
guarantee business in the country. The company’s goal is to provide a viable
alternative to local government financing. Its initial operations were in line with the provision for fiscal autonomy specified in the
Local Government Code of 1991, which expanded the local government’s fiscal authority by allowing LGUs to borrow from private financial institutions (PFIs) and float debt instruments even without prior approval from the
Department of Finance (DOF).
The first mandate of LGUGC was to open up private banks to direct lending to LGUs, but due to the available bond issuances planned for some LGUs in 1999, LGUGC shifted strategy immediately from slowly opening up PFIs to the LGU debt market thru direct loans to
guarantees of bond issues and LGU bond market development. Extensive advocacy work was done on LGU Leagues, multilateral agencies, Bangko Sentral ng Pilipinas (BSP) and national
government agencies (NGAs) such as the DOF, the Department of Interior and Local Government (DILG) and Commission on Audit (COA). LGUGC’s efforts, with the support of United States Agency for International Development (USAID), Financial Executives of the
Philippines (FINEX) and the NGAs, paved the way for the birth of a municipal bond market in the country.
LGUGC extended its first guarantees in 1999 to the City of Urdaneta and the Province of Aklan for bond issues of PhP25MM and PhP40MM, respectively. A total of 17 bond issuances have
been guaranteed by LGUGC over 17 years, aggregating PhP3.20 billion. Unfortunately, competition from the government financial institutions (GFIs) after LGUGC
operationalization made LGU bond flotation appear costlier and more complicated, thus becoming unpopular among Local Chief Executives (LCEs). GFIs, especially Land Bank of the
Philippines (LBP), adjusted loan terms and conditions from off-market to prime market after LGUGC made its presence felt. After the PhP50 million Baliuag Star Bonds were issued on June 19, 2006, there was a three and a half year lull until the next LGU bond issuances guaranteed
by LGUGC, those of the Province of Aklan and Municipality of Alfonso Lista, Ifugao in 2009 and Infanta Water Bonds in 2011, the last municipal bond guaranteed by LGUGC.
Through the years, LGUGC remains unwavering in its advocacy to obtain an open declaration of national government support for the LGU bond market development in the country. While
municipal bond floatation remains unpopular, however, LGUGC entertains applications for direct loans to LGUs.
Our History
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The opportunity to expand LGUGC’s services to water districts (WDs) came with the signing of a Memorandum of Agreement among the U.S. Agency for International Development (USAID),
Japan Bank for International Cooperation (JBIC), Development Bank of the Philippines (DBP) and LGUGC to pilot a financing scheme for water projects, referred to as the Municipal Water
Loan Financing Initiative (MWLFI). The MWLFI was aimed at testing the possibility of blending official development assistance (ODA) with private bank financing to make the latter more affordable to water service providers, which otherwise cannot meet pure private sector credit
finance terms. The Metro Iloilo Water District was the pilot and only water district assisted under the program. The MWLFI was the precursor of the Philippine Water Revolving Fund (PWRF) of JBIC, the USAID, DBP, Municipal Development Fund Office (MDFO) and LGUGC,
which was designed to support the Philippine government attain its Millennium Development Goals for water and sanitation. While the Philippine Water Revolving Fund (PWRF) project
ended in 2011, LGUGC’s involvement in the project familiarized its Board, management and marketing staff with the water sector and led to the expansion of its guarantee services to WDs. As of end 2015, LGUGC has guaranteed 15 water districts (WDs) aggregating PhP2.09 billion in
loan amount.
In 2004, LGUGC ventured on a new type of service offering: program management. The World Bank (WB), with the full backing of the DOF, tapped LGUGC as its Program Manager for the USD10 million Electric Cooperative System Loss Reduction Project Partial Credit Guarantee
Program (ECPCG) executed by the Department of Energy (DOE). This was followed in 2006 by the management of two other DOE executed programs, the Capacity Building to Remove
Barriers to Renewable Energy Development-Loan Guarantee Fund (CBRED-LGF), and the RPP-Loan Guarantee Fund (RPP-LGF) for Photovoltaic Systems loans of rural households in off-grid areas. The LGUGC’s management of these programs opened LGUGC to opportunities among
electric cooperatives (ECs) and renewable energy technology providers (RETPs). With its experiences in these new markets, LGUGC further expanded its regular guarantee coverage to include ECs and RETPs.
In January 2005, the Asian Development Bank (ADB) responded to LGUGC’s call for additional
capitalization to expand its guarantee capacity. ADB purchased 718,969 shares and obtained 25% ownership of the company.
Through experience, LGUGC management is aware that as the PFI is exposed to and learns more of a particular borrower sector, the need for the LGUGC guarantee diminishes. There is
therefore the constant challenge for LGUGC to develop new markets and be a “Market Maker”. By being thus will LGUGC continue to be relevant and viable.
In January 2010, the Guarantee Facility for Medium and Large Enterprises (MLEs) was launched pursuant to the Board’s directive to expand LGUGC guarantee service to sectors other than its existing market. This facility encourages PFIs to fund MLE projects that have risk factors beyond
PFI internally acceptable limits. The facility focuses on the middle market engaged in basic infrastructure projects. LGUGC also successfully extended its guarantee services to bulk water
suppliers or borrowers that have contracts, joint ventures or build-operate-transfer projects with traditional LGUGC clients.
On December 2, 2013, the Asian Development Bank (ADB) exercised its option to redeem its
LGUGC shares under its Subscription Agreement with LGUGC. ADB believed that its
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developmental objective has been met which is to provide funding for a period of time until
LGUGC achieved commercial stability and growth.
Before the end of 2015, LGUGC was appointed as the program manager for “Access to
Sustainable Energy Programme” (ASEP) by the European Union through the World Bank. The
project aims to assist RoP through DOE utilize rural network solar and photovoltaic
mainstreaming mechanisms to provide electricity to off-grid countryside areas.
After only 17 years of operationalization, LGUGC’s credit enhancement has caused the flow of PhP9.696 billion in private sector funds toward critical local development projects of LGUs, WDs,
ECs, MLEs and RETPs. It only has one non-performing loan, an MLE, which defaulted in 2011.
Despite the exit of ADB in 2013, LGUGC has maintained its PRS Aa+ (corp.) issuer credit rating from the Philippine Rating Services Corporation since November 8, 2010 which enables LGUGC to keep the 20% risk weight for its guaranteed debts, while EC loans guaranteed under the
ECPCG program carry 0% risk weight.
Below is a summary of the results of LGUGC’s continuing pro-active institutional marketing strategy over a span of 17 years:
Signing in September 1999 of an agreement with the USAID/Development Credit Authority (DCA) where DCA undertook to guarantee 30% of the risk of qualified borrowers up to an exposure of USD8.55 million. The original five-year agreement
was extended for four years and expired on September 30, 2008. A second agreement for the USAID/DCA to co-guarantee up to 50% of LGUGC’s exposure to
LGU water utilities, water districts and private water supply providers up to an exposure of USD12.75 million was signed on September 24, 2008.
Receipt of various technical assistance from USAID for the (a) design and development of the LGUGC internal LGU Credit Screening and Rating System (LCSRS), (b)
computerization of the LCSRS, (c) LCSRS database update, (d) review of and recommendations on the LGUGC guarantee policies and procedures, (e) design of the Water District Credit Rating System, and (f) development of LGUGC guarantee pricing
mechanism.
Receipt of technical assistance from Australian Aid through the Philippines-Australia Governance Facility for the (a) review and improvement of the LCSRS, and (b) design and computerization of the LGUGC Portfolio Monitoring and Management System.
BSP approval of LGUGC’s proposal to reduce the risk weight of LGUGC-guaranteed
LGU bonds from 100% to 50%.
Insurance Commission approval of LGUGC’s proposal to make LGUGC-guaranteed LGU
bonds automatically qualify as reserve instruments of insurance companies. BSP approval of LGUGC’s proposal to allow private banks to serve as trustee agents of
LGU bond proceeds.
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Selection of LGUGC by the DOF and the DOE as program manager for the following guarantee funds:
o EC-PCG Program funded by Global Environment Facility (GEF) through the WB.
The program provides 80% guarantee cover for private banks’ loans to electric cooperatives (ECs) where at least 50% of the loan will be utilized for system loss reduction.
o CBRED-LGF Program funded by GEF through the UNDP. The program provides up to 85% guarantee cover for private banks’ loans to renewable energy proponents. The program has been transferred to the Republic of the
Philippines on May 31, 2011 through the DOE and has been renamed as DOE-LGF.
o Rural Power Project – Loan Guarantee Fund program funded by the GEF through the WB. The program provided automatic guarantee lines of up to PhP5 million to micro finance institutions to cover up to 50% of their loans to
rural households for the purchase of solar home systems. The program was terminated on June 30, 2009 in accordance with the DOE-WB RPP Project
Agreement.
Equity infusion by the Asian Development Bank (ADB) taking up 25% of total LGUGC
paid up capital on January 21, 2005.
Inclusion of the LGUGC in the JBIC and USAID sponsored PWRF Program, which institutionalized the private-public partnership formula in addressing the country’s water supply millennium development goal. LGUGC played a major role as the
guarantor of LGUGC partner private banks that co-financed with DBP loans to water service providers such as LGUs, water districts and private water suppliers. The PWRF program was active from October 2008 to September 2011.
Signing of a Memorandum of Agreement with Local Water Utilities Administration
(LWUA) on July 31, 2007 to jointly provide water districts (WDs) with a funding option that addresses the need of the WDs for longer term financing at the same time addressing Executive Order No. 279’s intention to eventually graduate WDs to the
formal financial system.
Invited to the Philippines Development Forum Sub-Working Group on Water Supply and Sanitation, specifically as a member of the Task Force on Financing and Infrastructure Development alongside DOF, Department of Budget and Management,
DBP, LBP, LWUA, LGU Leagues, WB, ADB, Japan International Cooperation Agency (JICA) and KfW.
Signing of a Memorandum of Understanding with Private Finance Advisory Network (PFAN) to promote clean energy investments in the country.
Signing of a Memorandum of Agreement with the National Electrification
Administration (NEA) on June 16, 2009 for LGUGC PFIs to co-finance EC capex
requirements.
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Invited by the World Bank to present in the Energy Week 2011: Sustainable Energy: Low Carbon, Acess and Governance Forum held in Washington D.C.
BSP approval of LGUGC’s proposal to reduce the risk weight of LGUGC-guaranteed
debts from 50% to 20%. Capital infusion by EastWest Bank Corporation amounting to P7.5 million.
Capital infusion by Robinsons Banking Corporation amounting to P7.5 million.
Exit of ADB as LGUGC shareholder on December 2, 2013.
BSP confirmation of 0% risk weight for EC loans guaranteed under the ECPCG program
Appointed as the Program Manager of the Access to Sustainable Energy Programme of European Union, World Bank and DOEs
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1998 LGUGC was formally incorporated on March 2, 1998 with a total paid-up capital of PhP216 million. This was the culmination of more than one year of planning and preparation. Then DBP Chairman Mr. Alfredo C. Antonio invited the Bankers
Association of the Philippines (BAP) to join hands and form a guarantee corporation primarily to encourage private banks to lend to LGUs.
Considered as a pioneering institution, LGUGC was the first to introduce a guarantee mechanism for LGU borrowings in the Philippines and the first private
corporation to go into the guarantee business in the country. The company’s vision was to provide a viable alternative to local government financing. Its operations were in keeping with the provision for fiscal autonomy specified in the
Local Government Code of 1991, which expanded the local governments’ fiscal authority by allowing them to borrow from private financial institutions or float
debt instruments even without prior approval from the DOF. LGUGC was expected to accelerate the competitive access of LGUs to financial
markets and ultimately to pave the way for further development and growth opportunities for both the government and the private banking sector.
1999 In its first year of operation, LGUGC institutionalized the systems and procedures for an effective guarantee mechanism. It extended its guarantees to the City of
Urdaneta and the Province of Aklan for bond issues of PhP25 million and PhP40 million, respectively. Four financial institutions and a financial advisor were
involved in the bond issues. The internal LGU Credit Screening and Rating System (LCSRS) was pilot-tested on these two accounts.
Extensive advocacy work was done on LGU Leagues, non-government organizations, multilateral agencies and the DILG, and a pro-active marketing
stance was developed to hurdle institutional challenges. In September, the USAID/ DCA signed an agreement with LGUGC where DCA undertook to co-guarantee 30% of the risk of qualified borrowers up to an aggregate exposure of
USD8.55 million. With these efforts, LGUGC laid the groundwork for the development of a
municipal bond market in line with its vision of an active capital market for LGU debts.
2000 In less than three years, LGUGC hit the PhP1 billion mark in guarantee portfolio, with a total of PhP940 million bond issuances guaranteed for the Puerto Princesa
“Green” Bonds and the Caloocan City “Katipunan” Bonds during the year. Two financial advisors submitted a total of five projects for evaluation during the year
and the number of involved financial institutions increased from four to five. To sustain its growth in portfolio and the achievements during its early years of operations, LGUGC worked on the following: (1) extension of financial advisory
and credit rating services, (2) completion of the pilot-testing of its internal LCSRS, (3) institutionalization of a Project Monitoring Board (PMB) for each
Operating Highlights
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guaranteed LGU bond issue, (4) escrow arrangement with DBP-Trust to ring-fence a guarantee fund that may be used only for payment of claims, and (5) started negotiations for equity infusion with various BAP member banks and
bilateral/multilateral institutions. Recognizing LGUGC’s thrusts and achievements, the USAID Regional Urban Development Office for South and Southeast Asia chose LGUGC as a model of public-private sector partnership for other Asian
developing economies.
2001 Despite the local elections, LGUGC guaranteed the bond issuances of Tagaytay City for PhP220 million and Iloilo City for PhP130 million. LGUGC took advantage of the lull in guarantee activities to review its internal policies and procedures.
Work toward the computerization of its LCSRS and Portfolio Monitoring System (PMS) began with technical assistance from the Philippines-Australia Governance
Facility (PAGF) of Australian Aid. USAID, on the other hand, approved a technical assistance for the expansion of the LCSRS database from 120 to 500. LGUGC likewise participated in various presentations, seminars and forums of the DOF,
DILG, Department of Budget and Management (DBM) and FINEX. Management’s efforts to make LGU bonds attractive investment instruments resulted to two
BSP circulars making LGU debts eligible alternative agri-agra compliance and reducing LGUGC-guaranteed LGU bonds’ risk weight from 100% to 50%.
The company evaluated a total of four project feasibility studies during the year, worked with two financial advisors and maintained its close relationship with its
existing partner financial institutions.
2002 Total guarantee portfolio stood at PhP1.231 billion by yearend with two deals
aggregating PhP117 million booked for the bond issuances of the municipalities of Daraga and Bayambang for a public market and reconstruction of a dry goods
market, respectively. Ten feasibility studies were actually evaluated. The company worked with five private financial advisors and added an investment house to its pool of active partner financial institutions.
LGUGC continued to advocate for a policy environment conducive to LGU debt market advancement through the development of strong ties with national
government agencies and private financial sectors. LGUGC signed Memoranda of Agreement with DOF/Bureau of Local Government Finance (BLGF) as well as
with individual government financial institutions (GFIs) on information exchange regarding LGU debts. LGUGC had a wider pool of private sector partners – six financial advisors, seven lead and participating underwriters and two trustees.
Complementing these partnerships was the completion of the computerization of the LCSRS and portfolio management systems through the PAGF technical
assistance. Noteworthy were the various recognitions accorded to LGUGC: cited by the
USAID as one of the Successful Development Models for the 21st Century, and as one of the Six Best Practices of USAID/DCA.
2003 2003 marked the fifth year of LGUGC as a credit enhancer for LGU debts. LGUGC capped the year with two bond issues of PhP205 million and PhP390 million for
an academic center in Leyte and a commercial complex in San Juan, respectively.
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LGUGC advocacy initiatives included: (1) tapping insurance companies for possible partnerships which resulted to the Insurance Commission’s acceptance
of LGUGC-guaranteed bonds as reserve investments of insurance companies, (2) hosting a consultative meeting among technical representatives of national government agencies involved in LGU bonds, (3) conducting an orientation on
the mandate and services of LGUGC to the National Economic Development Authority (NEDA) Regional Development Officers, (4) participating in the
nationwide advocacy campaigns of FINEX on alternative LGU fund sourcing, and (5) a meeting with JBIC. Moreover, USAID support remained evident with a technical assistance obtained on portfolio risk management, determination of
actuarially-sound leveraging ratio, expansion of LGU database from 120 to 500 LGUs, and publication of the screening results of said LGUs.
A total of six project feasibility studies were submitted and evaluated. The company added two new financial advisors to its pool of seven and increased the
number of its active partner financial institutions from six to eight.
2004 For the first time since its operationalization, LGUGC covered 100% of its total expenses by operating income consisting of guarantee fee, program management fee and interest income from these fees.
2004 marked a milestone for LGUGC with its new service offering - program
management. World Bank, with the full backing of the DOF, tapped LGUGC as its Guarantee Program Manager for the USD10 million Electric Cooperative System Loss Reduction Project- Partial Credit Guarantee Program (ECPCG) to be
conduited through the DOE. At the same time, LGUGC enhanced the bond floatation of three LGUs for
infrastructure projects worth PhP697 million. These were extended to the Municipalities of Carmona and Imus and the City of Pasay for middle-income
housing subdivision, slaughterhouse and the construction of a two-storey modern public market and commercial center, respectively. Nine project feasibility studies were submitted and evaluated during the year. The company
held extensive discussions with ten financial advisors and eight financial institutions for various prospective LGU projects.
The institution remained unwavering in its advocacy to obtain an open declaration of national government support for the LGU bond market
development in the country. The effort to liberalize the trusteeship of LGU bonds then limited only to government banks finally paid off. BSP approved the proposal and allowed PFIs to serve as trustee agents of any mortgage or bond
issuances by LGUs and issued a circular containing the guidelines for PFI eligibility as trustee of LGU debt instruments.
Another milestone in 2004 is the signing of Memorandum of Agreement among USAID, JBIC, DBP and LGUGC to pilot a financing scheme for water projects,
referred to as the MWLFI. The MWLFI was aimed at testing the possibility of blending official development assistance (ODA) funds (from JBIC via DBP) with
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PFIs’ loan co-guaranteed by LGUGC and USAID to make it affordable to water service providers, which otherwise cannot meet pure private sector credit finance terms. The MWLFI was eventually pilot tested through Metro Iloilo Water
District in 2006. The MWLFI was the precursor of the PWRF that will be proposed by JBIC and USAID in 2006.
2005 The company successfully completed negotiations for additional capital infusion by the ADB. A subscription agreement was entered into between ADB and the
LGUGC, whereby ADB formally expressed its desire to subscribe shares equivalent to 25% of the outstanding capital stock of the Company, fully diluted. This further enhanced LGUGC’s financial position as a credit guarantee institution
in the eyes of the various stakeholders its serves.
LGUGC continued to actively pursue a policy environment conducive to the development of the LGU bond market through its various advocacies and involvement in both government and private sector–led forums concerning LGU
financing. The advocacy activities included: 1) eligibility of PFIs as LGU depository bank, 2) adoption of LGUGC FA accreditation system, 3) LGU credit
rating as a pre-requisite for bond issuance, 4) amendment of the local government accounting system to introduce separate record-keeping for each economic enterprise, and 5) review and implementation of the 1996 DOF LGU
Financing Policy Framework.
In late 2005, LGUGC management also reviewed its corporate vision, mission and strategies to maintain its competitive edge. The company expanded its guarantee coverage to include WDs, and opened its services to include direct
loans to LGUs. It likewise implemented a more aggressive direct marketing strategy.
A total of five project feasibility studies were evaluated for possible bond floatation but nothing materialized. One account was disapproved by the Board.
At this time, partner financial advisors cannot get mandates from LGUs primarily due to relatively cheaper cost of funds from loan financing over bonds.
2006 LGUGC continued to pursue an active marketing campaign in accordance with its revised strategies. This resulted in two closed deals aggregating PhP89 million,
one of which is a WD direct loan guarantee. Toward the second half of the year, LGUGC rationalized its organizational structure and enhanced its marketing unit. The year also saw LGUGC sign two more guarantee program management
agreements: 1) CBRED-LGF Program and 2) RPP-LGF. Moreover, the company further expanded its guarantee coverage to include ECs, RETPs and SUCs.
During the fourth quarter of 2006, management started its aggressive marketing campaign particularly among private banks. Advocacy with PFIs was a strategy
implemented to allow LGUGC to piggy back on PFI’s branch networks. While a total of 11 financial institutions participated in the past 15 projects of LGUGC,
only PNB, Allied Bank and Maybank were still actively marketing the LGUGC guarantee. As a result of initial presentations to PFIs, BPI, MetroBank and Union Bank committed to market the LGUGC guarantee.
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LGUGC continued to coordinate with its pool of 10 FAs though only three had live mandates for potential LGUGC guarantee extension. Three projects were being reviewed as of year-end, all of which came from LGUGC direct marketing efforts
with an LGU and WDs. In 2006, LGUGC was made a member of the Steering Committee that was
constituted to design the PWRF. The PWRF Steering Committee was formed in 2005 by the DOF, NEDA, BAP, JBIC and USAID. The Steering Committee and its
Technical Working Group have been working to explore options and modalities for a water revolving fund.
With LGUGC’s continued advocacy, PFIs’ interest on water sector financing grew as evidenced by their attendance in several PWRF consultation meetings. In
February 2006, five PFIs indicated interest to fund the second water project to be reviewed by LGUGC. Given the profile of accounts in the pipeline, it was anticipated that substantial portion of LGUGC’s new guarantees for 2007 shall be
from water projects. LGUGC management did not slow down on its advocacies for the development of
the LGU debt market, which included (1) Proposal to BSP for the application of the 50% risk weight applied on LGU bonds also to LGU loans under the same
conditions, with LGUGC guarantee and covered by a deed of assignment of IRA of the LGU, (2) Insurance Commission approval of the request to make LGU bonds guaranteed by LGUGC as automatic reserve eligible for insurance
companies, and (3) Proposal to the Office of the President for an Executive Order declaring LGU bonds as a core developmental concern of the National
Government.
2007 2007 being an election year, the management implemented a shift in strategy
and focused its marketing efforts on WDs, with encouraging results. It made landmark deals on water projects with eight water district loans totaling
PhP1.046 billion approved for 85% guarantee cover during the year. Booked guarantees were, however, only at PhP385 million or 64% of the PhP600 million target due primarily to some borrowers’ decision to delay loan availments to
2008. The loans approved for guarantee were for efficiency improvement, water supply improvement, and expansion projects.
To further assist the water sector, LGUGC entered into a Memorandum of Agreement with LWUA on July 31, 2007 where LWUA agreed to co-finance
loans to WDs with LGUGC accredited banks, provide a standby liquidity guarantee to co-lender after the latter’s maximum loan term expires to allow loan terms to stretch to as long as 25 years, and take over the management and
policy making functions of defaulting WDs on behalf of LGUGC and its partner accredited bank.
The year also saw the Company venturing into development sectors such as the renewable energy sector and the e-laboratory projects of SUCs, with one project
each approved for guarantee aggregating PhP55 million.
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Despite its shift in market focus, LGUGC management continued to keep an eye on opportunities among the LGUs. As of year-end, the guarantee applications of three LGUs were being processed.
Due to its aggressive marketing campaign among private banks to avail of its guarantee, LGUGC ended the year 2007 with a total of 12 accredited financial
institutions. Advocacy to PFIs was a strategy implemented to allow LGUGC to piggy back on the PFIs’ branch networks.
LGUGC continued to have the support of the USAID through its co-guarantee agreement with USAID/DCA. This partnership has been extended five times
since the agreement first expired in September 2004, the final expiry date being September 30, 2008.
LGUGC was likewise the recipient of two types of technical assistance from USAID. The first was the study on the methodology for pricing its guarantee,
and the second, the formulation of a credit rating framework for WDs. Study results were available in 2008.
The year 2007 saw a major shift in the marketing strategy of LGUGC for the ECPCG Program. Additional services were made available to ECs such as:
assistance in completing the requirements of lenders, the Energy Regulatory Commission (ERC) and other regulatory agencies; grant for feasibility study on capital expenditures as prescribed by ERC; and grant for tariff rate increase
study. The new marketing strategy paid off with six electric cooperatives signing the Memorandum of Understanding to show their commitment to avail of the
program before full due diligence is initiated. LGUGC established its RPP-LGF program management office (PMO) and worked
closely with the DOE in developing the market base for RPP-LGF. The PMO touched base with a number of network organizations in the microfinance industry to develop linkages and pave the way for partnerships with photovoltaic
system providers. As of year-end, three MFIs were accredited under the program. LGUGC management attached the PMO of CBRED-LGF to its
Relationship Marketing Department, actively promoted the program to financial institutions (FIs), and encouraged FIs to integrate the program in their regular product lines. As of year-end, the CBRED-LGF had 14 accredited FIs and two
approved renewable energy projects.
2008 LGUGC’s marketing efforts were concentrated on WDs and LGUs, specifically for projects involving the improvement of water quality and supply, and efficiency in the delivery of services in the countryside. These resulted to the approval of six
projects, four for WDs and two for LGUs, aggregating PhP782.48 million in loan amount. LGUGC booked PhP645 million worth of guarantees against its target of
PhP605 million. LGUGC management continued to keep an eye on opportunities among the LGUs
and other eligible markets. As of year-end, the guarantee applications of three LGUs, two WDs, one EC and one Build-Operate-Transfer (BOT) proponent for a
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public market were being processed. LGUGC likewise increased its number of PFIs from 12 in 2007 to 15 in 2008. In September 2008, a new five-year co-guarantee agreement was signed by LGUGC and USAID, specifically for water
projects of LGUs, WDs and private water suppliers. LGUGC was invited to the Philippines Development Forum Sub Working Group on
Water Supply and Sanitation, specifically on Financing and Infrastructure Development, in recognition of its important role in the development of the
water sector. The main function of the sub-working group is to serve as the forum of the Philippine government to apprise all stakeholders in the guiding principles and policies for the water supply and sanitation sector’s development
agenda.
2009 LGUGC achieved its guarantee volume target, booking PhP647 million from approved guarantees of PhP1.496 billion as of year-end against projection of PhP620 million, making 2009 another fruitful year. Its guarantee and program
management fees alone, excluding the interest income on said fees, covered total expenses by 151%, much higher than the 130% target. LGUGC maintained
its zero default record, with a Contingent Liability of PhP2.025 billion as of year-end 2009 for a leverage ratio of 4.3x against Net Worth.
The company continued its efforts to ensure that private resources are channeled to more local development projects in 2009 by: 1) maintaining close
linkages with PFIs, financial advisors, associations of target markets, and institutional partners, 2) improving guarantee evaluation and processing system and timeline, and 3) expanding guarantee coverage to include RETPs and private
water service providers. LGUGC further strengthened the ECPCG program by signing a Memorandum of
Agreement (MOA) with NEA on June 16, 2009 to co-finance EC capital expenditure requirements. With the MOA, the ECPCG program is expected to
finally take off. The CBRED-LGF program is being marketed aggressively. A new DOE policy
directive issued in November 2009, however, added another eligibility criterion, requiring proponents to be registered under DOE as RE technology providers
before they may qualify for the program. The RPP-LGF was terminated on June 30, 2009 in accordance with the DOE-WB
RPP Project Agreement. The company was able to deliver the following under the RPP-LGF: 1) accredited 5 MFIs with PhP1 million Automatic Guarantee Lines each, 2) a total of 188 PV installations guaranteed, and 3) guaranteed loan
portfolio amounting to PhP1.370 million.
BSP finally approved the reduction of the risk weight of LGUGC-guaranteed LGU loans, water district loans and bond issuances from 100% to 50%.
2010 LGUGC successfully covered 100% of its total expenses with pure guarantee fee by 113%. Including interest income on guarantee and program management
fees, operating income covered total expenses by as much as 168%. Nine
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accounts aggregating PhP748 million were booked against the PhP612 million target. LGUGC continued to enjoy zero default, ending the year with an outstanding contingent liability of PhP2.154 billion. It posted leverage ratio of
4.3x against Net Worth, Return on Equity of 6.7% and increase in Total Assets of 7.9%.
To sustain its growth in portfolio while keeping its focus on infrastructure development, LGUGC extended its guarantee services in the first quarter of 2010
to MLEs that are into local infrastructure and other developmental projects. Its aggressive marketing in this sector yielded three approved accounts aggregating PhP170 million in loan amount and 10 accounts in the pipeline with potential
investment requirement of PhP800 million.
LGUGC granted Philippine Veterans Bank (PVB) a P1 billion Automatic Guarantee Line (AGL) for LGU debt instruments to attract prospective co-funders. The LGUGC-PVB AGL aimed to enhance the security and risk-rating profile of the
LGUs through PVB’s IRA-depository bank authority at that time. The ECPCG Program finally booked two accounts with an aggregate loan amount
of PhP228 million. Four approved accounts with loan requirements totaling PhP448.11 million were in various stages of documentation as of year-end.
Through the hard work of LGUGC in moving the ECPCG program, the WB approved the request of the DOE for the release of the second GEF tranche of USD5 million for the ECPCG guarantee fund which will bring the program to its
design level of USD10 million.
To cap a memorable year, LGUGC obtained a second-highest rating of PRS “AA+” (Corp.) from the Philippine Rating Services Corporation on November 8, 2010. As a result of the rating, LGUGC received confirmation from the BSP that
all LGUGC-guaranteed loans and bonds shall have a risk weight of only 20% pursuant to BSP Circular No. 538.
2011 LGUGC’s audited financial statements as of December 31, 2011 showed Total Revenues of P81.301MM and Net Income of P40.641MM. 22% and 23% higher
than year 2010 results of operations, respectively. Total Net Worth rose by 9% to P553.339MM from P509.374MM in 2010. Total Assets increased by 11% to
P590.219MM. LGUGC proved its operating profitability in 2011 by covering total expenses with operating income by as much as 176%.
Seventeen accounts aggregating P1.319 billion were booked against the P880.600MM target. LGUGC continues to enjoy zero default, ending the year with an outstanding contingent liability of P2.491 billion. It posted leverage ratio
of 4.5x against Net Worth and Return on Equity of 7.6%.
In anticipation of the phase out of the ECPCG program that LGUGC manages for the World Bank and the Republic of the Philippines (RoP). Management entered into a MOA with NEA on July 11, 2011 for the co-financing of ECs’
funding requirements with LGUGC partner financial institutions under the regular LGUGC guarantee. These moves yielded 18 approved accounts aggregating
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P1.390B in loan amount and 21 accounts in the pipeline with potential investment requirement of P1.751B.
The ECPCG Program booked 7 accounts with combined principal guarantee coverage of P707.04MM. Four more accounts aggregating P443.97MM in loan requirements have been approved and are in documentation stage as of
yearend.
On November 7, 2011, the International Bank for Reconstruction and Development granted a two-year extension to the Electric Cooperative System Loss Reduction Project, including the Partial Credit Guarantee Program, setting
December 31, 2013 as the new closing date for the Grant Agreement. The RoP thus extended LGUGC’s management of the USD10MM EC-PCG program up to
December 31, 2013 as a result thereof. DOE likewise indefinitely extended its agreement with LGUGC to manage the
USD1.607MM Capacity Building to Remove Barriers to Renewable Energy Development-Loan Guarantee Fund program which has expired on May 31, 2011 and has since been turned over by the United Nations Development Programme
to DOE. The program is now called DOE-Loan Guarantee Fund (DOE-LGF).
To cap a memorable year, LGUGC maintained its PRS “Aa+” (corp.) issuer credit rating from the Philippine Rating Services Corporation for the period November 2011 to November 2012 which enables LGUGC to maintain the 20% risk weight
granted by the BSP to all LGUGC-guaranteed debts.
2012 LGUGC’s audited financial statements as of December 31, 2012 showed Total Revenues of P91.325MM and Net Income of P46.267MM, 12% and 14% higher than year 2011 results of operations, respectively. Total Net Worth rose by 8%
to P597.651MM from P553.339MM in 2011. Total Assets increased by 11% to P590.219MM, and Operating Income covered Total Expenses by 176%.
LGUGC booked 11 accounts in 2012 aggregating P911.737MM in loan amount and P753.077MM in guarantee coverage, consisting of 3 LGUs, 4 MLEs and 4
ECs. Of the 11 accounts, 2 were approved in 2011 and 9 in 2012. Philippine Veterans Bank enrolled 1 additional LGU account amounting to P34.077MM
under the Automatic Guarantee Line Agreement, increasing the total 2012 new guarantee bookings to P787.154MM. Total contingent liability inclusive of principal and interest as of end 2012 is at 2.4 billion, 4.10x the LGUGC Net
Worth and 8.22x its Capital. LGUGC booked 8 accounts under the managed ECPCG program aggregating
P1.162 billion in loan amount and P929.303MM in guarantee coverage. Of the 8 accounts, 3 were approved in 2011 and 5 in 2012. Total contingent liability
under ECPCG as of December 31, 2012 is P890.574MM consisting of 13 accounts, for a leverage ratio of 1.4x the ECPCG Guarantee Reserve and Interest Income Accounts.
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In anticipation of the phase out of ECPCG by yearend 2013, the World Bank started preparing a Philippine Clean Technology Fund (CTF) guarantee program that may replace the former. The CTF will not only cater to ECs but also to
private renewable energy developers that have Electricity Sales Agreements with ECs. As the proposed program manager for the CTF, LGUGC developed guarantee design, terms and conditions and presented these to its PFIs for
feedback during a dialogue on January 29, 2013. A workshop among LGUGC, DOE, NEA and PFIs was sponsored by the World Bank on February 5, 2013 for
further discussions and enhancement of the guidelines and procedures of the CTF guarantee program.
Another milestone of LGUGC in 2012 was the P7.5MM capital infusion of East West Bank Corporation through subscription of 50,000 common shares from new
and unissued shares of LGUGC. With the proven track record of LGUGC, East West Bank trusted that the bank will be able to actively participate in funding developmental projects.
LGUGC maintained its PRS “Aa+” (corp.) issuer credit rating from the Philippine Rating Services Corporation for the period November 2012 to November 2013 for
the third consecutive year. This allows its PFIs to maintain the 20% risk weight granted by the BSP to all LGUGC-guaranteed debts.
2013 LGUGC’s audited financial statements as of December 31, 2013 showed Total
Revenues of P149.910MM and Net Income of P83.623MM, 64% and 81% higher than year 2012 results of operations, respectively, due primarily to the sale of investments to realize trading gains. Total Assets increased by 11% to
P657.726MM from P590.219MM in 2012 (restated). Operating Income covered Total Expenses by as much as 189%.
Year-end contingent liability increased slightly to P2.49 billion from P2.44 billion in 2012 despite 5 maturing accounts and 2 accounts taken-out, equivalent to
4.98x the LGUGC Net Worth and 8.15x its Capital. LGUGC booked 6 accounts under the managed ECPCG program aggregating
P917.740MM in loan amount and P734.192MM in guarantee coverage. Total contingent liability under ECPCG as of December 31, 2013 is P1.453B consisting
of 18 accounts, for a leverage ratio of 2.3x the ECPCG Guarantee Reserve and Interest Income Accounts fund balances.
The ECPCG program under the World Bank (WB) expired last December 31, 2013. However, the Republic of the Philippines (RoP), through the Department of Finance, has informed the World Bank of its intent to utilize the proceeds of
the $10MM grant in escrow to continue the implementation of the ECPCG program, with LGUGC being retained as the Guarantee Program Manager. This
is, however, a transitory arrangement pending RoP approval of the WB-proposed Philippine Renewable Energy Development Project (PHRED) where an additional U$40MM will be made available by the WB for the expansion of the ECPCG
Program using Clean Technology Funds (CTF), for the financing of electric power distribution system upgrades, including the purchase of sub-transmission assets
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and emergency capital expenditure requirements of electric cooperatives. Also eligible under the PHRED are renewable energy projects of electric cooperatives (ECs) and renewable energy technology providers with ECs as joint venture
partners or ofttakers. On December 2, 2013, the Asian Development Bank (ADB) decided to exercise
its option to redeem its LGUGC shares under its Subscription Agreement with LGUGC. ADB believed that its developmental objective has been met which is to
provide funding for a period of time until LGUGC achieved commercial stability and growth. The redemption price shall be paid by LGUGC to ADB in 14 semi-annual principal installments plus interest equivalent to the “91-day t-bill peso
rate” plus 2.5% points in accordance with the terms and conditions set out in the Repayment Agreement. LGUGC Net Worth declined by 16.4% to
P499.377MM from 597.651MM in 2012 as a result of the ADB redemption. However, the share redemption did not have a significant impact on LGUGC’s credit rating which remained at PRS Aa plus (corp.) as assessed by the Philippine
Ratings Services Corporation (PhilRatings). LGUGC also retained its assigned 20% risk-weight on LGUGC-guaranteed loans.
LGUGC welcomed a new member to its family, Robinsons Banking Corporation (Robinsons Bank), which made a capital infusion of P7.5MM through subscription
of 50,000 common shares from new and unissued shares of LGUGC. 2014 LGUGC’s audited financial statements as of December 31, 2014 showed Total
Revenues of P81.036MM and Net Income of P36.445MM, respectively. Total Assets decreased slightly by 0.4% to P654.829MM from P657.726MM in 2013
due to principal loan repayment to Asian Development Bank for the redeemed Class B Common shares. Operating Income covered Total Expenses by as much as 165%.
Year-end contingent liability increased to P2.63 billion from P2.49 billion in 2013,
equivalent to 5x the LGUGC Net Worth. LGUGC booked 16 accounts consisting of 3 LGUs, 3 ECs, 2 WDs and 8 MLEs equivalent to P1.23 billion in new guarantees surpassing its P1 billion 2014 target by 23%.
Despite the delay in the extension of the implementation of the managed Electric
Cooperative Partial Credit Guarantee (ECPCG) program, LGUGC signed 5 accounts under the ECPCG program aggregating P808MM in loan amount and P646MM in guarantee coverage. The program has guaranteed loans totaling
P2.83 billion, with contingent liability of P1.45 billion consisting of 21 EC accounts as of December 31, 2014, for a leverage ratio of 2.04x the ECPCG Guarantee Reserve and Interest Income Accounts fund balances.
The Republic of the Philippines (RoP) through the Department of Energy and
Department of Finance has committed to continue the successful ECPCG program, increase the fund through the Clean Technology Fund, and expand eligibility to renewable energy projects involving electric cooperatives as full or
partial proponent/developer and/or offtaker. The extension is currently undergoing the approval process of the RoP.
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LGUGC continues to entertain the EC sector under its regular program to fill the funding gap for the electric cooperatives’ system modernization projects which
remains at a significant level.
2015 LGUGC’s interim financial statements as of December 31, 2015 showed Total Revenues of P67.134MM and Net Income of P26.701MM, respectively. Total Assets decreased slightly by 2% to P638.934MM from P654.829MM in 2014 due
to principal loan repayment to Asian Development Bank for the redeemed Class B Common shares. Operating Income covered Total Expenses by as much as 144%.
To sustain its portfolio growth, LGUGC continued to be aggressive in marketing
its guarantee services to LGUs, WDs, ECs, RETPs and MLEs that are into local infrastructure and other developmental projects. This strategy resulted in the increase in LGUGC’s year-end contingent liability to P3.08 billion from P2.63
billion in 2014, equivalent to 5.8x the LGUGC Net Worth. LGUGC booked 19 accounts consisting of 12 MLEs, 4 LGUs, 1 WD, 1 EC and 1 RETP equivalent to
P1.51 billion in new guarantees. A pipeline of accounts with potential investment requirement of P2.44 billion was also established.
LGUGC enhanced its relationship with existing clients by providing free consultation and reacting fast to client’s needs and market movements such as
lowering guarantee fees and offering flexible terms of guarantee fee payments. For prospective clients, LGUGC offers loan tenors that match their cash flow requirements, competitive borrowing cost, new guarantee products and value-
added services to keep ahead of competition. LGUGC signed additional five EC accounts aggregating P427MM in loan amount
and P342MM in guarantee coverage. These accounts will automatically be transferred to the Electric Cooperative Partial Credit Guarantee (ECPCG) program
as soon as the program extension is implemented. A total of P2.86 billion in loan amount has been guaranteed under the ECPCG program, with contingent liability of P1.41 billion. These consist of 19 EC accounts, for a leverage ratio of 1.86x
the ECPCG Guarantee Reserve and Interest Income Accounts fund balances.
In line with LGUGC’s vision to be the recognized private sector link in public- private partnerships for local development financing, LGUGC continues to assist the national and local government in economic development through credit
enhancement of local infrastructure project loans. In its seventeen years of operations, it has guaranteed 99 projects nationwide amounting to P9.696 billion in loan amount consisting of developmental projects of LGUs, WDs, MLEs and
ECs and RETPs which include, but are not limited to, construction of water supply systems, reduction of non-revenue water, public markets,
slaughterhouses, public terminals, commercial centers, tertiary hospitals, bulk water supply, water sanitation system, EC system loss reduction projects and renewable energy projects. LGUGC’s strong affiliation with its partner financial
institutions (PFIs) is a major factor to its continuing volume growth. To date, LGUGC has 13 PFIs consisting of 2 government banks and 11 private financial
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institutions most of which have aggressively referred accounts to LGUGC. LGUGC has likewise maintained its alliance with donor agencies such as USAID and WB, and national government agencies and the Bangko Sentral ng Pilipinas
to smoothen the entry of its PFIs in unchartered debt markets.
LGUGC has maintained its PRS Aa+ (corp.) credit rating from the Philippine Rating Services Corporation since November 8, 2010, which enables it to keep
the 20% risk weight for its guaranteed debts. EC loans guaranteed under the ECPCG program carry 0% risk weight. LGUGC is also awaiting BSP’s confirmation of the application of 0% risk weight for loans guaranteed under the LGUGC-
managed DOE-Loan Guarantee Fund program for RETPs.
With its proven track record in program management, LGUGC has recently been appointed as the program manager for the Access to Sustainable Energy Programme (ASEP) by the European Union through the World Bank. The
program aims to assist the Republic of the Philippines through the Department of Energy to provide electricity to off-grid areas through rural network solar and photovoltaic mainstreaming. The program promotes the developmental and
optimal use of the country’s renewable energy resources.
Lastly, to maintain its competitive edge, LGUGC further strengthened its portfolio risk management systems and procedures and the due diligence expertise of its personnel in various markets to efficiently manage its risks.
Guarantee
LGUGC guarantees the indebtedness of LGUs, WDs, ECs, RETPs, SUCs and MLEs. The guarantee fee is a function of the underlying borrower and project risks. Fees range from
0.5% to 2% per annum.
Credit Rating
LGUGC implements an internal credit rating system for LGUs, the LCSRS, in the absence of a formal stand-alone entity specializing in risk evaluation of LGUs. The LCSRS adopts
internationally-accepted standards fit for due diligence requirements of PFIs and individual investors. The system serves as the primary guide for both the LGUGC and PFIs to identify LGUs that are primed for the commercial credit market. More importantly, the credit rating
system establishes the LGU’s willingness to honor contractual obligations in addition to its capacity to pay. It is also a tool for LGUs toward better local governance.
Products and Services
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Until such time that an independent and reputable rating agency is established, LGUGC will continue to disseminate screening and rating information to the public on a regular basis.
LGUGC also implements an internal credit rating system for WDs designed by the Indian-
based firm, CRISIL Ltd. (India), contracted by the USAID-PWRF. The credit rating system serves as a tool for LGUGC to evaluate the creditworthiness of WDs. This determines LGUGC’s decision to guarantee loans of water districts.
Program Management LGUGC is currently managing the guarantee funds for DOE-LGF supervised by the DOE, and has been tapped to manage the subsidy allocation of Access to Sustainable Energy
Programme (ASEP) funded by the European Union and implemented by World Bank. It continues to monitor EC accounts booked under ECPCG.
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24
LGU PROJECTS Indicative Terms and Conditions
Eligible Borrower
: LGUs with a rating of at least “BA” or classified as A, B or C after credit screening under the LCSRS
Eligible Project/Purpose
: Any revenue and non-revenue generating infrastructure project
Lender : Any LGUGC PFI
Term : Co-terminus with the PFI loan
Single Guarantee Limit
: 25% of LGUGC Net Worth
Guarantee Coverage
:
:
Up to 85% of the debt service, with interest subject to the
LGUGC interest rate cap*. To be determined based on PFI request and Borrower Risk
Rating System results
Guarantee Fee :
:
Risk-based
Indicative range of 0.25% - 1.25%
Collateral :
: :
Assignment of IRA
Assignment of Project Revenues and Project Assets Assignment of Debt Service Fund
*Interest Rate Cap – the guaranteed maximum interest shall not exceed the sum of: (a) three percentage (3%) points plus (b) the weighted average
interest rate for 182-day Treasury bills issued by the Philippine National Treasury during the immediately preceding twenty-four (24) months.
25
WATER PROJECTS Indicative Terms and Conditions
Eligible Borrower
: WDs with a rating of at least “BBB” under LGUGC’s internal WD
credit rating system
Eligible Project/Purpose
: Water source development and protection
Treatment and Level III distribution Sanitation
System upgrading and reduction of NRW Support facilities
Bulk water supply Rehabilitation and expansion
Lender : Any LGUGC PFI
Term : Co-terminus with PFI loan
Single Guarantee Limit
: 25% of LGUGC Net Worth
Guarantee Coverage
:
:
Up to 85% of the debt service, with interest subject to the
LGUGC interest rate cap To be determined based on PFI request and Borrower Risk
Rating System results.
Guarantee Fee :
:
Risk-based
Indicative range of 0.65%-1.50% p.a.
Collateral :
: :
Assignment of Debt Service Fund
Assignment of Proceeds of Water Billings Assignment of Project Assets
26
EC PROJECTS Indicative Terms and Conditions
Eligible Borrower
: Creditworthy Electric Cooperatives (ECs) Duly registered with the NEA or the Cooperative
Development Authority Has ERC-approved capital investment proposal
Must meet the minimum projected Debt Service Coverage Ratio of 1:1 based on the forecasted cash flow
Eligible Project/Purpose
: Upgrade of EC power distribution systems to realize energy and emission savings
Lender : Any LGUGC PFI
Term : Co-terminus with the PFI loan but not to exceed 15 years
Single Guarantee Limit
: 25% of LGUGC Net Worth
Guarantee Coverage
:
:
Up to 80% of the debt service with interest subject to LGUGC interest rate cap
To be determined based on PFI request and internal Borrower Risk Rating System results
Guarantee Fee : 0.25% per annum
Processing Fee : One-time fee of up to 1.5% of the guaranteed portion of the principal amount of the loan, exclusive of taxes and collected
upfront
Collateral :
: :
Assignment of Proceeds of Power Billings
Assignment of Debt Service Fund Other assets acceptable to the Lender and LGUGC
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MEDIUM AND LARGE ENTERPRISES (MLEs) PROJECTS
Indicative Terms and Conditions
Eligible Borrower
: MLEs excluding the top 1,000 corporations
Eligible Project/Purpose
: Short Term Loan Working Capital Loan
Term Loan Fixed Asset Loan
Permanent Working Capital Loan
Lender : Any LGUGC PFI
Term : Co-terminus with the PFI loan
Single Guarantee Limit
: 25% of LGUGC Net Worth
Guarantee Coverage
:
:
Up to 85% of the debt service with interest subject to the LGUGC interest rate cap.
To be determined based on PFI request and internal Borrower Risk Rating System results
Guarantee Fee :
:
Based on the borrower credit rating or risk classification,
transaction size and cost, security, project risk and term risk, and applied on the principal and interest coverage; Indicative range of 1% to 2 % per annum
Processing Fee :
:
1/8 of 1% of guaranteed amount;
Negotiable
Collateral :
: : :
Assignment of Project Revenues/Receivables
Assignment of Contract with Suppliers Assignment of Debt Service Fund Other assets that may be required by LGUGC
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DOE-LGF Indicative Terms and Conditions
Eligible Borrower
: Renewable energy technology
proponents/developers/providers/suppliers
Eligible Project/Purpose
: Hydropower (pico, micro, mini) Biomass-based (biogas, power and non-power)
Wind (power and non-power) Solar (photovoltaic systems and solar water heaters)
Term : Up to 10 years with maximum 2 years grace period, but not to exceed the PFI loan term
Single Guarantee Limit
: PhP50 Million
Guarantee Coverage
: :
Up to 80% of the principal amortization To be determined based on PFI request and Borrower Risk
Rating results
Guarantee Fee : 0.25% per annum
Processing Fee : PhP1,000
Collateral : :
:
Assignment of Project Assets Assignment of Debt Service Fund
Assignment of Proceeds of Power Billings/Receivables
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Credit Evaluation Process
30
TENDENCY FOR DEBT REPAYMENT
DEVELOPMENT AND ENDOWMENT RISK
Credit Groups
1
Economic and Political Endowment Risk
B Development
Risk
A
C
D
2
Risk of Unilateral Restriction
of Debt Payments
Credit Screening
1.A
1.B
1.C
1.D
2.A
2.B
2.C
2.D
OPERATING AND FINANCIAL CONDITION
RISK
MANAGEMENT RISK
Preliminary Credit Rating
Final Credit Rating
Operating
Financial
Management Ba
Aaa
Aa
A
B
C
Credit Rating
LGU Credit Screening and Rating System
LCSRS Rating Methodology
31
Credit Rating for Water Districts (CRWD)
WD Rating
32
DOE-LGF to market and identify
projects eligible under the program
Applicant submits LGA, FS and other
requirements
LGUGC endorses to DOE-REMB
accounts for technical review
DOE-REMB evaluates technical
viability of the project
LGUGC/PFI approval
Loan and Guarantee
Documentation
Loan Availment
PMB Meeting
LGUGC notifies the Applicant of
Approved/Disapproved LGA
LGUGC Board approves/disapproves
LGA
DOE-LGF Management
Committee reviews Credit Memo (CM) and clears LGA for
LGUGC Board
LGUGC evaluates financial viability of
project after passing technical review and
prepares CM if project passes
financial evaluation
Monitoring
DOE-LGF Program
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BORROWER PROJECT LOAN AMOUNT
(P MM)
TERM PARTICIPATING FINANCIAL
INSTITUTIONS
LOCAL GOVERNMENT UNITS
1. Agoo, La Union Public Market 110.00 10 BPI/Allied Bank (PNB)
Agoo Hypermarket Ph. II 49.00 10 BPI
2. Binalonan, Pangasinan University of Eastern Pangasinan Building
45.00 BPI
3. Rosario, La Union Ph. II of New Public Market and Slaughterhouse
70.00 10 BPI
35.50 10
4. Province of Aklan Renovation of Caticlan Passenger Terminal; Enhancement of old Caticlan Coastline; Reclamation of
Foreshore portion
260.00 10 PNB
5. Infanta, Pangasinan Water Supply and Distribution System 50.00 10 DBP
6. Anda, Pangasinan Two-Storey New Anda Wet Market
Building
30.00 7 PNB
7. Roxas, Palawan Public Market and Integrated Public Terminal
101.00 15 DBP
8. San Francisco, Quezon Acquisition of Heavy Equipment 44.74 7 EastWest Bank
One-storey Public Market and a Public
Terminal Building
51.75 10 Allied Bank (PNB)
9. San Antonio, Nueva Ecija
Construction of New Slaughterhouse Building and Integrated Terminal Complex
54.28 10 EastWest Bank
10. Bongabon, Nueva Ecija Construction of a New Slaughterhouse Building
22.17 10 DBP
11. Iba, Zambales New Public Market 110.00 12 EastWest Bank
12. Maddela, Quirino New Public Market Phase II 65.00 10 EastWest Bank
13. San Isidro, Nueva Ecija New Public Market and New
Slaughterhouse
73.23 12 EastWest Bank
14. Pantabangan, Nueva Ecija
Construction of Terminal 2 and Two-Storey Commercial Complex; and Construction of Farm-to-Market
Roads
100.30 12 EastWest Bank
Subtotal 1,271.97
MEDIUM AND LARGE ENTERPRISES
1. AM Gatbonton Bulk Water Supply (BWS) Facilities under TCWD and CFSWD
13.50 5 Allied Bank (PNB)
BWS with CSJDMWD 36.25 7 Allied Bank (PNB)
BWS for NAWAD 10.00 5 Security Bank
2. Amertech Industrial Ventures, Inc.
2 Steam Boiler plants for Coca-Cola Bottlers Phils,Inc.
35.00 7 BPI
3. Healthserv Los Banos,
Inc.
Completion of 4-storey, 80-bed
Tertiary Hospital
50.00 10 BPI
Purchase of a CT Scan 20.00 5 BPI
4. Twin Rivers
Corporation.
BWS Project with DWD 120.00 10 Allied Bank (PNB)
BWS for Silang WD 50.00 10 Security Bank
5. PAPISSS, Inc. Slaughterhouse for Lemery, Batangas 20.00 7 BPI
Outstanding Guaranteed – Regular Accounts (As of December 31, 2015)
34
Construction of Lemery Public Market under a 25-year BLT Scheme
45.00 10 BPI
6. Worldchem Envirotech , Inc.
Bahay Toro Sewage Treatment Plant 58.00 1 BPI
7. Abejo Waters Corp. Water Production, Treatment and Distribution in Panglao, Bohol
120.00 12 BPI
8. Aquadata, Inc. Rehabilitation and Improvement of
Bauan Waterworks System
150.00 10 MBTC
Private Water Supply Distribution
within Municipality of San Pascual, Batangas
150.00 10 MBTC
9. DC Tech Read, Bill and Collect Projects for 7 ECs in Visayas and Mindanao
171.00 7 Security Bank
10. Don Bosco Technical Institute (DBTI) Makati
Four-storey School Building 194.12 10 EastWest Bank
11. DBTI Tarlac Three-storey Building and Refinancing of DBTI Tarlac
Outstanding Loan to Bank of Florida
60.70 10 EastWest Bank
12. Envirokonsult Equipment and Services
RCL 50.00 1 MBTC
13. Jelka 5 Star Fishing Corp.
Acquisition of Fishing Equipment and Machineries
20.00 1 Security Bank
14. Kempal United Corporation
RCL 20.00 1 PNB
15. Lin Man Power Technology, Inc.
RCL 150.00 1 RCBC
16. Mater Dei Academy of Sta. Maria Bulacan, Inc.
Four-storey Building with Covered Court
26.75 10 DBP
17. North Terradev Corp. Commercial Building 35.00 10 RCBC
18. See’s International Food Mfg. Corp.
Expansion and Construction of Davao City Plant
85.30 10 UCPB
19. Summa Water Resources, Inc.
Water Treatment Facility for BWS with MARWADIS
40.35 5 RCBC
20. Texin, Inc. Dampalit River BWS Joint Venture
under Laguna Water District
70.00 10 MBTC
Subtotal 1, 800.97
WATER DISTRICTS (WDs)
1. Cabanatuan City WD Rehabilitation and Expansion of Water System
250.00 10 BPI/MBTC
2. Indang WD Expansion of Water System 15.00 10 BPI
16.00 10 BPI
3. Puerto Princesa City WD
Expansion and Rehabilitation of water system
120.66 10 BPI
4. City of San Fernando
WD
Rehabilitation and Expansion of
Water System
226.00 10 BPI/Allied Bank (PNB)
5. San Pedro WD Office Building and Water Facilities
and Lot Acquisition
150.00 10 BPI
Continuous Expansion and Improvement of Water Supply System and Construction of Proposed Building
100.00 10 BPI
6. Tarlac City WD Expansion of water system 116.00 10 BPI
7. San Pablo City WD Various CAPEX under SPCWD 2014 Business Plan
170.84 10 Allied Bank (PNB)
Subtotal 1,164.50
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PVB AUTOMATIC GUARANTEE LINE
1. City of Angeles,
Pampanga
Construction of Angeles City Sports
Coliseum
250.00 12 PVB-Assignor
BPI-Assignee
2. City of Toledo, Cebu Construction and Site Development of
Toledo City Hotel
58.44 7 PVB-Assignor
BPI-Assignee
3. Caraga, Davao Oriental Caraga Public Market//Terminal/Commercial Complex
77.41 10 PVB
4. San Miguel, Bulacan Purchase of Various Heavy Equipment 40.09 7 PVB
5. San Pedro, Laguna New Municipal Hall Building and Renovation of Jose L. Amante Hospital
149.94 12 PVB
6. Trece Martirez, Cavite Slaughterhouse and 13-Towers Bldg. 72.66 7 PVB
Subtotal 648.54
ELECTRIC COOPERATIVES
1. Camiguin Electric Cooperative, Inc. (CAMELCO)
System Loss Reduction and Enhancement of Power Distribution Operation
80.00 10 BPI
2. La Union Electric
Cooperative, Inc. (LUELCO)
Capital Expenditure Projects 82.36 10 Allied Bank (PNB)
3. Misamis Oriental II Rural Electric Services Cooperative, Inc.
(MORESCO II)
System Loss Reduction and Enhancement of Power Distribution Operation
80.00 10 BPI
4. Bukidnon Second
Electric Cooperative, Inc. (BUSECO)
Installation of Substation, Line
Rehabilitation and Relocation of Transformers
170.39 10 PNB
Subtotal 412.75
TOTAL 5,298.73
36
BORROWER PROJECT LOAN
AMOUNT (P MM)
TERM PARTICIPATING
FINANCIAL INSTITUTIONS
LOCAL GOVERNMENT UNITS
1. Boracay-Aklan Jetty Port and Terminal Building 40.00 7 LBP-Trustee RCBC Cap-Underwriter
2. Bayambang, Pangasinan
Public Market 42.00 7 PNB-Trustee MIB-Underwriter
3. Caloocan City Public Market 185.00 7 PNB-Trustee RCBC Cap-Underwriter
PCI Cap-Underwriter Commercial Area with Toll Parking 225.00 7
General Hospital 210.00 7
4. Carmona, Cavite Housing 150.00 7 DBP-Trustee
ICCP-Underwriter PCI Cap-Underwriter
5. Daraga, Albay Public Market 75.00 7 PNB-Trustee RCBC Cap-Underwriter
6. Iloilo City Employees Housing 130.00 3 PNB-Trustee RCBC Cap-Underwriter
7. Imus, Cavite Slaughterhouse 47.00 7 DBP-Trustee Unicapital-Underwriter
8. Leyte Academic Center 205.00 7 RCBC Cap-Underwriter PCI Cap-Underwriter
9. City of Pasay Public Market and Commercial
Center
500.00 7 PNB-Trustee
PCI Cap-Underwriter PNB Cap-Underwriter
10. Puerto Princesa City Low-cost Housing 320.00 7 PNB-Trustee RCBC Cap-Underwriter
11. San Juan City Multipurpose Gym, Commercial Building and Toll Parking
390.00 7 PNB-Trustee Allied Bank (PNB)-
Underwriter PCI Cap-Underwriter
12. Tagaytay City Convention Center with Lodging Facility
220.00 7 PNB-Trustee RCBC Cap-Underwriter
13. Urdaneta City Slaughterhouse 25.00 5 PNB-Trustee SolidBank-Underwriter
14. Baliwag, Bulacan Integrated Solid Waste Management Sys.
50.00 7 PNB-Trustee PNB Cap - Underwriter
15. Imus, Cavite Multi-purpose Cadastral Survey 23.00 5 BPI
16. Alfonso Lista, Ifugao Construction of Water Supply and Distribution System
72.50 10 PNB
17. Province of Palawan Priority Projects 74.96 10 PVB
Refinancing Outstanding Loan with LBP
69.14 8 PVB
18. Caraga, Davao Oriental Refinancing Outstanding Loan 13.00 4 PVB
19. Province of
Zamboanga Sibugay
Rehabilitation/Repair of Satellite
Centers
50.00 9 PVB
Redeemed Accounts (As of December 31, 2015)
37
20. Binalonan, Pangasinan Refi nancing of Outstanding Loan with LBP
25.00 7 BPI
21. Bongabon, Nueva Ecija Construction of a New Slaughterhouse Building
44.13 10 EastWest Bank/DBP
Subtotal 3,185.73
WATER DISTRICTS (WDs)
1. Calamba WD Repair and Rehabilitation of Water Lines and Distribution System
40.00 5 BPI
2. Laguna WD Expansion of Water System and Refinancing of LWUA Loans
99.49 10 BPI
3. Silang WD Repair and Expansion of Water System
189.00 10 PNB
4. Legazpi City WD Bulk Water Supply 105.00 7 BPI
5. Metro Iloilo WD Rehabilitation of Water System and Refinancing of LWUA Loans
38.13 7 PNB
6. Zamboanga City WD Rehabilitation and Expansion of Water System
200.00 10 Security Bank
7. Norzagaray WD BWS 70.00 7 MBTC
8. Mabalacat WD Water Filtration System Facilities 50.00 10 Allied Bank (PNB)
Construction of Ground Reservoir and Upgrading of Existing Water System
135.00 10 Allied Bank (PNB)
Subtotal 926.62
MEDIUM AND LARGE ENTERPRISE
1. Worldchem EnviroTech, Inc.
Pinagsama Sewage Treatment Plant
50.00 2 BPI
Bahay Toro Sewage Treatment Plant
115.00 10 Allied Bank (PNB)
2. Amertech Industrial Ventures, Inc.
2 Steam Boiler plants for Coca-Cola Bottlers Phils,Inc.
70.00 7 BPI
3. Healthserv Los Banos,
Inc.
Working Capital 30.00 1(RPN) BPI
Subtotal 265.00
ELECTRIC COOPERATIVE
1. Isabela I Electric Cooperative, Inc. (ISELCO I)
Additional Working Capital 20.00 1 MBTC
Subtotal 20.00
TOTAL 4,397.35
TOTAL OUTSTANDING AND REDEEMED ACCOUNTS 9,696.07
38
BORROWER PROJECT LOAN
AMOUNT (P MM)
TERM PARTICIPATING
FINANCIAL INSTITUTIONS
1. Bohol I Electric Cooperative, Inc. (BOHECO I)
System Loss Reduction and Enhancement of Power Distribution Operation
109.92 15 DBP
Installation of Substation,
Line Conversions and Procurement
of 69 KV
81.07 10 DBP
2. Bukidnon Second Electric
Cooperative, Inc. (BUSECO)
Installation of 10MVA
Substation
135.90 10 BPI
Installation of 5 MVA
substation at DMPI and Construction of 69 kV Double
Circuit line, Rehabilitation of Over-extended Secondary
Line, Relocation of 5 MVA
43.49 10 PNB
Implementation of Emergency Capex - Lunocan
Substation
25.89 10 Security Bank
3. Camiguin Electric Cooperative, Inc. (CAMELCO)
Construction of 10kms 13.2kV Submarine Cable
140.00 10 BPI
4. Camarines Norte Electric Cooperative, Inc. (CANORECO)
System Loss Reduction and Enhancement of Power
Distribution Operation
133.25 10 BPI
5. Davao Electric Cooperative, Inc.
(DANECO)
Uprating of two(2)
Substation from 10MVA to 20 MVA
172.37 10 UCPB
6. First Bukidnon Electric Cooperative, Inc. (FIBECO)
Capital Expenditures 143.00 10 Allied Bank
7. La Union Electric Cooperative, Inc. (LUELCO)
Capital Expenditures 173.13 10 Allied Bank
8. Misamis Occidental I Electric Cooperative, Inc. (MOELCI I)
System Loss Reduction and Enhancement of Power
Distribution Operation
167.73 10 UCPB
9. Misamis Oriental I Rural Services Electric Cooperative, Inc. (MORESCO I)
Capital Expenditures 115.00 10 Security Bank
10. Misamis Oriental II Rural Services Electric Cooperative,
Inc. (MORESCO II)
Installation of 5MVA S/S, Reconductoring of Backbone
Lines, Procurement of KWH Meters
135.49 10 BPI
Outstanding Guaranteed – ECPCG Accounts (As of December 31, 2015)
39
11. Pangasinan I Electric Cooperative, Inc. (PANELCO I)
Capital Expenditures 113.00 7 BPI
12. South Cotabato I Electric Cooperative, Inc. (SOCOTECO I)
Capital Expenditures 102.42 10 BPI
13. Surigao del Norte Electric Cooperative, Inc. (SURNECO)
Capital Expenditures 85.00 10 UCPB
14. Benguet Electric Cooperative, Inc. (BENECO)
Capital Expenditures 163.50 10 BPI
15. First Catanduanes Electric Cooperative, Inc. (FICELCO)
Capital Expenditures 106.10 10 Security Bank
16. Nueva Ecija I Electric Cooperative, Inc. (NEECO I)
Capital Expenditures 173.54 10 Allied Bank
17. Bohol II Electric Cooperative,
Inc. (BOHECO II)
Installation of 2-5 MVA
Substations, Uprating of 2.5 MVA to 5 MVA Substation
184.18 10 Security Bank
18. Leyte V Electric Cooperative, Inc.
(LEYECO V)
Substation Expansion
Projects with 6.9 Kms. 69KV Subtransmission
Line and System
185.86 10 Security Bank
19. Palawan Electric Cooperative,
Inc. (PALECO)
System Loss Reduction 167.00 10 PNB
TOTAL 2,856.84
BORROWER PROJECT LOAN AMOUNT (P MM)
TERM PARTICIPATING FINANCIAL
INSTITUTIONS
1. DPJ Engineers and Consultant/Tabuk
1MW Bulanao Mini-Hydropower Plant
34.00 8 UCPB
2. Tubao Mini Hydro Electric Corp. 1.5MW Mini-Hydro Power Plant
58.82 10 DBP
TOTAL 92.82
BORROWER PROJECT LOAN
AMOUNT (P MM)
TERM AND
RATE
PARTICIPATING
FINANCIAL INSTITUTIONS
OUTSTANDING
BALANCE (P MM)
1. Gerphil Renewable Energy, Inc.
Panoon Falls Mini-Hydro Power Plant
9.20 15 years with 1 year grace period @
6% p.a.
Allied Bank (PNB) 5.73
TOTAL 9.20
Outstanding Guaranteed – DOE-LGF Accounts (As of December 31, 2015)
Restructured DOE-LGF Account (As of December 31, 2015)
40
USAID CO-GUARANTEE LGUGC has a co-guarantee agreement with USAID which effectively expands LGUGC’s capacity to cover water projects of LGUs, WDs and private water service
providers in the Philippines through USAID reinsurance of up to 50% of LGUGC’s enrolled portfolio.
USAID Technical Assistance 2000 - final review of the LGUGC internal LCSRS after the pilot testing of the first six
LGUs; 2001- expansion of the LCSRS database from 120 to 500 LGUs; 2002- support from legal specialists on policy issues pertinent to bond market
development and review of LGUGC’s capital adequacy with regard to leverage; 2003- portfolio risk management and determination of actuarially-sound leveraging ratio for LGUGC; and
2008- guarantee pricing methodology and WD Credit Rating System.
AusAid-PAGF Activity Agreement
Computerization of the LCSRS and Portfolio Management System to enhance LGUGC’s credit evaluation and account monitoring processes.
Institutional Linkages
41
World Bank-Global Environment Facility
LGUGC had a project agreement with the World Bank-Global Environment Facility (WB-GEF) until December 31, 2013 to manage the USD10 million WB-GEF partial credit guarantee facility for eligible system loss reduction projects of rural electric
cooperatives.
UNDP – Global Environment Facility
LGUGC was the Guarantee Program Manager (GPM) of the USD1.606 Million CBRED-LGF program, funded by the GEF through the United Nations Development
Programme, up to May 31, 2011, when the fund was turned over to the RoP through DOE. DOE continued the program and extended appointment of LGUGC as PM indefinitely. The project provides partial credit guarantee to proponents of renewable
energy projects on a credit risk or collateral short basis.
# Financial Institution No. of LGUGC Shares
Contact Person/s
1 Banco de Oro Universal Bank BDO South Tower, Makati Avenue
Corner H.V. Dela Costa Street Makati City Tel. Nos.: 878-4572/840-7914
100,000 MR. NESTOR V. TAN President/CEO
2 Bank of the Philippine Islands
6768 Ayala Avenue corner Paseo de Roxas Makati City
Tel. Nos.: 845-5855
100,000 MS. JO ANN B. EALA
Vice President, Specialized Lending Unit Head, Sustainable Energy Financing Head
3 Development Bank of the
Philippines DBP Bldg. Makati Ave., Cor. Sen. Gil Puyat Ave.,
Makati City Contact No.: 840-2826
1,081,900 MS. MA. TERESA M. JESUDASON
First Senior Vice President
4 EastWest Banking Corporation 3/F, Beaufort Tower, 5th Avenue corner 23rd Street
Bonifacio Global City Contact No.: 575-3834
50,000 MR. FERDINAND E. YAP Vice President, Corporate Banking Group II
Partner Financial Institutions
42
5 Metropolitan Bank and Trust Company Metrobank Plaza, Sen. Gil J. Puyat Ave.,
Makati City Contact No.: 870-0700/898-9049
200,000 MS. MARILEN Z. TRINIDAD Asst. Vice President Large Corporate Division, Corporate Banking Group
MR. ELIGIO C. LABOG, JR.
Executive Vice President Head, Commercial Banking Group
6 Philippine National Bank PNB Financial Center, Pres. Diosdado Macapagal Blvd., 1300
Pasay City Contact No.: 526-3131 to 70/526-3245
100,000 MR. ALLAN L. ANG Senior Vice President Head, Government Banking Group
7 Philippine Veterans Bank
PVB Bldg., 101 V.A. Rufino cor. Dela Rosa Sts., Legaspi Village, Makati City
Contact No.: 902-1600/857-3800
50,000 MR. PLATO C. TIROL
Vice President
8 Rizal Commercial Banking Corp.
11/F RCBC Head Office, Yuchengco Tower, RCBC Plaza, 6819 Ayala Ave., Makati City
Contact No.: 894-9553/894-9821
50,000 MS. ANGELA V. TINIO
Senior Vice President Head, Commercial, Small and Medium Enterprise Division
9 Robinsons Banking Corporation
17/F Galleria Corporate Center EDSA cor. Ortigas Ave., Quezon City
Contact No.: 702-9514/702-9500
50,000 MS. CHEPPS C. MARCELO
First Vice President Head, Commercial Lending II
10 Security Bank Corporation
Security Bank Centre, 6776 Ayala Ave., Makati City
Contact No.: 888-7224
50,000 MR. JORGE LINDLEY S. ONG
Senior Vice President
11 Union Bank of the Philippines 22/F UnionBank Plaza, Meralco Ave. cor. Onyx & Sapphire Roads,
Ortigas Center, PasigCity Contact no.: 667-6466/502-6313
100,000 MR. EFRENILO L. CAYANGA, JR. Group Head – Commercial Banking Center
12 United Coconut Planters Bank (UCPB)
UCPB Executive Bldg., Makati Ave., Makati City Contact No.: 811-9000/ 810-2842
50,000 MR. ALEXANDER M. BORJA Corporate and Consumer Banking Team Head
13 Land Bank of the Philippines Land Bank Plaza, 1598 M.H. del
Pilar cor. Dr. J. Quintos Streets, Malate, 1004 Manila Contact No.: 405-7318
50,000 MS. CECILIA C. BORROMEO Executive Vice President