PROPERTY developer DoubleDragon Properties Corp. may spend P450 million per year in interest expense alone on its outstanding loan as a result of the rise in interest rates. Some of its debts have floating interest.
Analysts and brokers said the property developer is vulnerable to rising rates, even as it earlier said it remains generally unaffected by the rise in interest rates.
Broker Colfinancial said that, while majority of its P33-billion obligations are peso denominated, around P15.2 billion “have a floating interest cost based on a spread of 1.75 percent to 2.35 percent over the PDST-R2 rate or some other benchmark, depending on which rate is higher.”
PDST rates are being used as a benchmark of rates as it is the set of interest rates for several maturities or tenors of government-issued securities.
Abacus Securities Corp. said when the loans were tapped, the floor rate for these ranged from 4.25 percent to 6 percent.
“Since the 10-year yield has climbed nearly 300 basis points in the past 12 months, the prevailing rates on these loans now range from 9.25 percent to 9.85 percent. Given that the outstanding balance on these loans was almost P15 billion at the end of the second quarter, we estimate the additional interest DoubleDragon has to pay is close to P450 million per annum,” it said.
“Despite the rising interest-rate environment, DoubleDragon remains generally unaffected as we were prudent early on in making sure all our corporate notes and retail bonds have fixed interest rates for seven years to 10 years. The company also has no US dollar exposure with all fund raises being peso denominated,” the company said in a recent statement on the announcement of the construction of its ninth building in DD Meridian Park in Pasay.