BPI sells P6.3B of NPLs to Avenue Asia

Ayala-owned Bank of the Philippine Islands (BPI) has unloaded another P6.3 billion worth of non-performing loans (NPLs) through a sale and purchase agreement with Avenue Asia, a leading player in the distressed asset market in the US.

BPI has so far sold a total of P17.3 billion in NPLs in wholesale transactions. It has averaged a little over P2 billion in annual retail transactions in the past three years.

In 2004, it sold P8.6 billion in NPLs to Morgan Stanley in a landmark transaction under the Special Purpose Vehicle (SPV) Law.

The following year, BPI sold another P2.4 billion worth of NPLs to Asset Pool A (SPV-AMC) Inc. and Avenue Asia Special Situations Fund III L.P., funds managed by the Avenue Capital Group.

In a statement, BPI said that the third tranche of NPLs is "a testament to BPI’s continuing commitment to shareholders to maintain the bank’s leadership in the industry."

"The transaction also demonstrated the strong interest of foreign investors in Philippine assets thus signifying better economic prospects," it added.

The disposal of non-performing assets (NPAs), both real and otherwise properties owned or acquired (ROPOA) and NPLs, became even more urgent for banks and non-bank financial institutions with the imposition of the new international accounting standards.

Aside from the disposal of bad assets, banks have been forced to raise fresh capital to meet the new standards. Most have undertaken Tier 1, Tier 2 and several hybrid modes to keep within the capital adequacy ratio (CAR) set by the Bangko Sentral ng Pilipinas.