BSP okays $84-M loan to fund purchase of NHMFC NPLs

The Bangko Sentral ng Pilipinas (BSP) has approved in principle an $84-million loan for a special purpose vehicle that would acquire non-performing housing loans from the National Home Mortgate and Finance Corp. (NHMFC).

The Monetary Board approved the loan that would come from the Asian Development Bank (ADB), the International Finance Corp. (IFC) and the real estate arm of Deutsche Bank which would pool the fund together for Balikatan Housing Corp., an SPV created for the purpose.

BSP Deputy Governor Amando Tetangco told reporters over the weekend that the loan package has been approved in principle pending the finalization of the loan agreements with the individual creditors.

Tetangco said the BSP wanted to encourage similar arrangements in the housing sector since housing construction has a high economic multiplier.

Earlier, the MB approved the proposed peso-denominated bond issue of the ADB intended to raise up to P3 billion also for the acquisition of the bad loans of NHMFC.

The MB approved the issue last week where the ADB would issue five-year, zero coupon bonds in the local market – the first of such bonds to be issued by a multilateral agency.

The proceeds of the issue would be used for on-lending to Balikatan Housing Corp., the special purpose vehicle that would buy non-performing loans from NHMFC.

The BSP said ADB was targeting the housing sector as the main beneficiary since it has a large multiplier effect particularly in terms of job generation.

Because the ADB was a multilateral funding agency with triple A rating, the BSP said the peso-denominated issue would be very attractive to local investors.

NHMFC has been trying to unload its bad loans since last year, attempting to auction some P14 billion worth of bad housing loans. The auction failed twice due to disagreements over the ownership structure of the SPV.

NHMFC later agreed to increase it’s interest in the AMC from 25 percent to 49 percent in order to justify the amount of control that it wanted to retain in the management of the bad loans portfolio.

Originally, the NHMFC wanted a 25-percent share while retaining significant management control over the AMC. To make the term more acceptable, however, NHMFC instead agreed on a 49-51 ownership structure.

The NHMFC had earlier pre-qualified four groups: Goldman Sachs, Lone Star, Lehman Brothers and Deutsche Bank. At the first auction, however, only two bids were submitted to the bidding committee.

The auction was also marred by concerns over Executive Order 281 which deferred the eviction, foreclosure and cancellation of housing accounts that have been marked inactive and delinquent.

The EO directed all government housing agencies to come up with a restructuring plan for the restructuring of delinquent accounts but DOF sources said the sale to private asset management companies would be part of this comprehensive plan.