Lehman Bros eyes NPLs of Landbank

After losing its Metrobank deal to Ravo Bank, Lehman Brothers is now eyeing the non-performing loans (NPLs) of Land Bank of the Philippines (Landbank), pending the approval of the proposed law on asset management companies.

Finance Secretary Jose Isidro Camacho told reporters that Lehman was attracted by Landbank’s NPLs although nothing has been finalized by either side.

According to Camacho, Lehman has set its sights on several banks with Landbank being the most prominent among them.

Camacho said it is up to Landbank to line up the NPLs and non-performing assets that it wants to include in the portfolio. If the two parties come to an agreement, Lehman is likely to acquire the entire portfolio at a discount and then turn these assets around.

The US-based investment bank had originally intended to put up a joint asset management company with Metropolitan Bank and Trust Co. (Metrobank), a transaction that would have allowed the Philippine bank to get rid of some P31 billion worth of bad loans.

Lehman’s plan was to spend about $1 billion buying bad loans from banks as well as housing mortgages of the government and other problematic assets that could still be turned around.

Lehman was also planning to invest in other projects such as the securitization of the government’s receivables from the Malampaya natural gas project.

However, after a lengthy process of negotiations, Lehman was outbid by the Rabobank Nederland.

Metrobank sold over P16 billion worth of non-performing loans (NPLs) to Asia Recovery Corp., an asset management company (AMC) set up on the basis of investments by a foreign group led by Rabobank, the third largest bank in the Netherlands.

The sale and purchase agreement was the first ever in the banking industry and probably the largest in amount. It is now pending for approval by the Bangko Sentral ng Pilipinas. The deal followed the collapse of the P15-billion deal between Metrobank and Lehman.

The lead investor in the AMC, Rabobank, is a triple-A rated bank, and is one of the top 100 banks in the world based on a recent Euromoney survey. Rabobank has been particularly active in purchasing NPLs in the Asian region, especially in Indonesia where it has acquired NPL assets from Indonesian Bank Restructuring agency (IBRA).

According to Camacho, Lehman was not discouraged by the collapse of its talks with Metrobank and has in fact been looking at other banks aside from the Landbank. He said Lehman is prepared to make the investment, depending only on the prospects in this line of business.

The passage of the bill is expected to spur the creation of asset management companies that will acquire the banking industry’s NPLs and foreclosed assets that at present are worth over P470 billion.