RCBC sells P3.9-B bad assets to Lehman Bros

Rizal Commercial Banking Corp. (RCBC) has finalized agreements for the sale of P3.9-billion worth of its bad assets to global investment firm Lehman Bros., industry sources said.

The two entities are reportedly in the process of filing their application for a special purpose vehicle (SPV) with the Securities and Exchange Commission (SEC). An SPV can avail of several incentives if the SEC recognizes it within the September deadline mandated by the Special Purpose Vehicle Act.

However, the same sources declined to reveal the mode of payment for the sale.

In an earlier interviews, RCBC officials said that the bank would likely issue subordinated notes to Lehman following a formula of P1 worth of subordinated notes for every P1 of non-performing loans (NPLs). "That would serve as the bank’s discount of the bad assets," the officials said.

Meanwhile, the planned disposal of the Philippine Bank of Communications’ (PBCom) P12.5-billion bad assets also drew interest from bidders.

As of yesterday, there were already six entities conducting or initiating due diligence of the bank’s bad assets for sale. It was earlier reported that four parties– Bank of America (BA), Deutsche Bank, Sovereign Fund, and Marathon Fund are already in the process of conducting due diligence.

Unconfirmed information also indicated that Lehman have initiated the early stages of due diligence while representatives of Ayala Corp. are reportedly prepared to move in on the data rooms.

PBCom has set up five data rooms for the sole purpose of the due diligence reviews of interested parties.

Last month, the Bank of the Philippine Islands (BPI) sold P8.6 billion in non-performing loans (NPLs) to Morgan Stanley Emerging Markets Inc., making it the first successful sale of a local expanded commercial bank to a foreign asset management companies (AMC) via the SPV method.

Morgan Stanley has since filed its application documents with the SEC for the formation of the SPV.

"It is a good deal, and we are happy to be rid of a big chunk of our planned sale," Aurelio R. Montinola III, BPI senior executive vice president and chief operating officer said.

Other banks trying to beat the September deadline are the Land Bank of the Philippines (LBP), the United Coconut Planters Bank, the Philippine National Bank, and Equitable PCI Bank.