LBP okays city gov’t’s request to prepay loan

The Cebu City government got the Land Bank of the Philippines’ endorsement to prepay its loan balance with the Japan International Cooperative Agency (JICA) used for the city’s Metro Cebu Development Project.

LBP, which funded the project through a subsidiary loan agreement with the city on March 1996, wrote to the Bangko Sentral ng Pilipinas that it approves the city government’s request to prepay the loan.

“LANDBANK interposes no objection on the attached letter request of the Cebu City Government to prepay the Metro Cebu Development Project III,” read LBP’s November 9 letter addressed to BSP governor Amando Tetangco, Jr.

The city borrowed from JICA 12.315 billion yen or around 4.65 billion pesos to finance the reclamation of the 300-hectare South Road Properties, which is under the MCDP.

Currently, the city still owes JICA over P2.4 billion. The remaining balance is supposedly due in 2025.

Mayor Michael Rama earlier wrote LBP asking for the bank’s favorable endorsement to the BSP regarding their intent to pre-terminate the loan.

In a press conference yesterday, Rama said he has also sent the necessary documents to BSP, informing them that the city already has the money to pay the balance.

“Naa ron sa Bangko Sentral ng Pilipinas, naa na ko’y mga papel didto. Ako silang gi-highlight-an nga ayaw mo og dugay-dugay. Nianhi ko pahibawo ninyo nga naa na ang kwarta sa City Treasurer’s Office,” said Rama.

He will be returning to Manila this week to follow up with BSP officials.

In his November 4 letter to LBP, Rama also asked the bank to waive the P43-million pre-termination fee that the city would incur.

Rama said the request is sanctioned under Section 6 of Article I of the Subsidiary Loan Agreement between the LBP and the city for MCDP - Phase III.

Section 6 provides that the “Lender shall not charge the borrower handling and commitment fees. No pre-payment penalty shall likewise be charged provided that OECF (Overseas Economic Cooperation Fund) likewise waive the same. Provided, further, that in case the borrower pre-terminates the sub-loan, it shall be liable to the lender for the payment of gross receipt tax as provided under Section 119 of the National Internal Revenue Code.”

The city further said it has obtained City Council Resolution expressing the approval to prepay the loan and a letter from the Bureau of Local Government Finance and the Department of Finance.