Biz Buzz: Conflict at the TOP

CHANGE is coming to the top echelon of the Bureau of the Treasury (BTr) soon. Well, close to the top, to be more accurate.

Word on the street is that longserving Deputy National Treasurer

Eduardo Mendiola is all set to retire, leaving the BTr without one of its most reliable sources of expertise, stability and “institutional memory.”

According to our sources, Mendiola—whose title is abbreviated as “DTOP” for “DeputyTreasurer of the Philippines”—is not getting along well with his direct boss, TOP Rosalia de Leon, who was appointed to the post late last year vice Roberto Tan, who was seconded to the World Bank in Washington D.C.

The crux of the disagreement, we were told, is Mendiola’s desire to move the BTr (and the rest of the local bond market) to the so-called “single price convention” that would result in higher trading volumes for the market. It would also allow the bond holdings of tax exempt institutions like the GSIS and the SSS to become tradable resulting in an overall improvement in the local capital markets.

Upon her appointment, however, De Leon supposedly ordered a top-to-bottom review of policies, resulting in this measure being put on the back burner. Banking wags tell us that the “deferment” of this policy was meant to help ensure that the country would receive the coveted debt ratings upgrade this year, because the proposal had the potential to make it look like the government’s debt stock ballooned all of a sudden (a big no-no for credit ratings firms). No less than administration “higher ups” opposed this single price convention, for this very reason, wewere told.

In any case, the tightly knit banking community says Mendiola has been increasingly isolated by the powers that be, of late. It’s a real shame, since most agree that “DTOP Ed” has long been one of the most qualified to lead the agency, having been a treasurer-in-waiting for many years. Now we may never know howhe’ll do as the “TOP.” Daxim L.

Lucas

LTG’s grand debut

AFTER some refinements in its consolidation structure, tycoon Lu

cio Tan’s LTG Group Inc. is getting ready to brave the capital markets with a follow-on stock offering. This will mark the debut of LTG, which used to be just a liquor company, as the group holding firm under the leadership of heir-apparent

Michael Tan.

LTGhas yet to finalize the size of the offering but based on last year’s stated plans, it could sell up to three billion common shares through a top-up offering. Its controlling shareholder, Tangent Holdings, will place out some of its shares for a quicker equity deal, but it will eventually subscribe to the same number of new shares at the same price. In a way, Tangent will only be lending its shares to allow LTGto raise fresh equity.

To date, LTG—previously Tanduay Holdings—has acquired a 36percent (indirect) interest in Philippine National Bank (the surviving entity in the merger with Allied Bank) and is working to raise its interest to 60 percent. It has also gob- bled up 99.58 percent of Fortune Tobacco Corp., 99.3 percent of Asia Brewery Inc. (and subsidiaries) and 99.3 percent of Eton Properties Inc. It said it would defer the inclusion of its interest in flag carrier Philippine Airlines, now managed by San Miguel Corp., in this consolidation.

Based on its end-2012 financial statements, LTG’s consolidated assets amounted to P97.6 billion. Total equity was P52.61 billion, of which P46.76 billion was attributable to LTG.

In 2012, net profit attributable to LTG hit P7.51 billion from P5.85 billion a year ago, while revenue dipped to P30.57 billion from P32.69 billion. Doris C. Dumlao

Funding gaming

FOR all the optimism on how fast the Philippine gaming industry can grow—and how it may even outpace Singapore’s current market size in six years—there’s just one complication gaming operators may face when it comes to sourcing funds.

Foreign banking sources say gaming operators can only borrow from local banking institutions to fund their working capital and other requirements. This is because foreign banks are constrained from lending to gaming firms due to stiffer international anti-money laundering rules, which make it difficult for them to extend financial muscle to casino-related firms. The Philippine Congress may have been more lenient on casinos in the latest amendment to the anti-money laundering law but the foreign guys still have to follow the blueprint in their home markets. So they may have to just say no to gaming borrowers.

Local banks are fortunately awash in cash and likely eager to lend but they also have to deal with the single borrower’s limit.

So to be able to tap funding from foreign banks, if needed, a banking source said one way would be to consider a structure whereby the borrower isn’t the gaming operator itself but one or several layers on top—for instance, a parent company with other interests aside from gaming.

Another way is, of course, to ditch any debt-raising exercise and focus on selling equity instead. Like Bloomberry Resorts Corp.—once a dormant firm and soon the latest addition to the Philippine Stock Exchange index roster, more gaming operators are ready to strike while the iron is hot. Doris C. Dumlao

Bullish on PH

BRITISH banking giant HSBC emerged as one of the most vocal among financial institutions that are bullish on the Philippines’ prospects. HSBC people have been bullish on the country’s prospects long before it became trendy to do so. They just kept it to themselves for a while.

The British banking giant has clearly shed its bashfulness when it comes to proclaiming the gospel that is the Philippine growth story. An example is a recent research report entitled “In a sweet spot: But is the love for the Philippines justified?” (The conclusion was a resounding “yes” of course.)

In it, HSBC predicted that the country would receive the coveted investment grade from international debt watchers by the second half of the year, based on the “prudent management of the economy” by the Aquino administration.

This is not all talk, of course. The bank has been putting its money where its mouth is. Proof of this is the fact that it was recognized last month by The Asset magazine as the best debt house in the country for the fifth year in a row.

Last week, HSBC was also recognized by the Philippine Dealing System as the country’s top dealing participant for corporate securities and top securities custody house, among others, which showed it jumped into the pool with both feet.

As always, the HSBC team is now under pressure by higher ups, we’re told, to surpass last year’s achievements. Daxim L. Lucas

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