SSS in talks for possible joint venture with AMCs

The Social Security System (SSS) is holding exploratory talks for a possible joint venture with any among several asset management companies (AMCs), both local and foreign, as well as several multilateral agencies.

The Philam Asset Management Inc. (Pami) is one of the local groups while several Hong Kong-based institutions have also been cited as among the entities making a bid to form a joint venture company. The new company is envisioned to stop the hemorrhaging of the pension fund in the short term and make it into an economically viable activity in the long term.

Pami is a subsidiary of the Philippine American Life and General Insurance Corp. (Philamlife), the leading life insurance and financial institution in the country.

SSS president and chief executive officer Corazon S. de la Paz said they would like to have a 20- to 25-percent stake in the joint venture company "for clearly long-term purposes."

"We would also like to rip the benefits when the joint venture starts making profits," de la Paz said.

The International Finance Corp. (IFC) and the Asian Development Bank (ADB) have also signified an interest to participate indirectly. The IFC is the private investment arm of the World Bank.

The two multilateral agencies have made it public that they are prepared to assist in the formation of joint ventures or asset management companies (AMCs) for the disposal of bad assets held by local financial institutions.

However, their participation would come in the form of funding requirements of the AMCs or joint ventures, and not direct equity into the said formations.

That is the same tack introduced when several AMCs formed a consortium to acquire the bad assets of the Bank of the Philippine Islands (BPI) recently. Unfortunately, the bank and the consortium failed to reach an agreement.

SSS holds several properties foreclosed from individual members or corporations that have failed to meet their contribution requirements. SSS officials said that they have received a wide variety of assets, which were used as dacion en pago (payment in kind) for delinquent contributions or commercial loans.

"But we are not receiving such high risk and low revaluation items as machinery," they said.

At present, the SSS is working on some 36,000 to 40,000 foreclosed properties (mainly low-cost housing) worth P4 billion. These would be eligible for the proposed joint venture although the pension fund has been looking at various ways for its disposition.

It successfully worked out an agreement earlier between the National Home Mortgage Financing Corp. (NHMFC) and its financial advisor, Ernest & Young. At stake are foreclosed properties worth roughly P27 billion.

The total amount has reached over P40 billion due to huge penalties and interest as the NHMFC had been delinquent in its earlier payments.