Megawide to sponsor P3B loan for Carbon

LISTED firm Megawide Construction Corp. (Megawide) has agreed to sponsor a P3 billion loan for its wholly owned subsidiary Cebu2World Development Inc. (Cebu2World), developer of the new Carbon Market in Cebu City.

On May 10, 2023, Megawide executed an omnibus loan and security agreement with Cebu2World and lenders the Philippine National Bank (PNB) and Land Bank of the Philippines (LBP).

Under the omnibus loan, Megawide agreed to create a security interest over its present and future shares of stock and its entire ownership interest in Cebu2World in consideration for Cebu2World’s availment of financing to undertake the mixed-used development of the Carbon Market.

The financing includes the availment of a term loan facility in the aggregate amount of up to 60 percent of the project’s cost or P3 billion, whichever is lower.

Planned funding

“We are following the project’s planned funding strategy. The capital expenditure (capex) spent so far had been advanced off Megawide’s equity. We are grateful to our banking partners for the trust,” said Lydwena Eco, operations director at Cebu2World in a text message Friday, May 12.

She said the P3 billion loan is part of the planned capex for the entire Carbon Market re-development.

“Borrowing (or leveraging) is a funding strategy, especially for a capital-intensive real estate development like the Carbon Market redevelopment,” she said.

Megawide named PNB Capital and Investment Corp. as mandated lead arranger and bookrunner, LBP as co-lead arranger and bookrunner, and PNB acting through its Trust Banking Group as facility agent and security trustee.

In 2022, Megawide adjusted the capex for Phase 1 of the Carbon modernization project from its previous commitment of P5.5 billion to P8 billion during the term of the joint venture agreement with the Cebu City Government.

The modernization will be done in phases. Phase 1 will have three sub-phases of redevelopment to be accomplished in five years. Sub-phase 1 covers the interim market, bagsakan, senior citizens’ park and the site development.

The Carbon Market Redevelopment is a 50-year joint venture with the Cebu City Government. It covers the modernization of the 100-year-old Carbon Public Market as well as the infrastructure development of the entire district. Under the contract, Cebu City will receive an annual guaranteed payment of P50 million with 10 percent escalation every five years.