The IFC will provide medium term financing of $10 million to $20 million each to the top three leasing companies with the total combined amount not exceeding $50 million.
Of the total amount, the IFC will account for $30 million while the remaining $20 million will be shouldered by several unnamed participating international financial institutions.
The three major leasing firms are PCI Leasing and Finance Inc. (PCI Leasing), Orix Metro Leasing and Finance Corp. (Orix Metro), and BPI Leasing Corp. (BPI Leasing).
Orix Metro is allied with the Metrobank group of companies, PCI Leasing with Equitable PCIBank, and BPI Leasing with the Ayala group of companies.
Each participating leasing company will also be required to implement an environmental management system consistent with host country requirements.
IFC will assess each participating leasing company’s capability to carry out environmental reviews. In addition, each participating leasing company will be required to submit an annual environmental performance report.
According to the IFC, the project aims to strengthen the country’s leasing sector through a financing package called Philippine Leasing Line. It will provide medium term financing to the above leasing companies. The proposed line will allow the leasing companies to obtain medium term financing to match the tenors of their lease receivables.
In a report, the IFC said medium term financing at reasonable rates is not available to leasing companies in the Philippines, most leases are funded short term, resulting in asset- liability mismatches.
"IFC’s presence is likely to play an instrumental role in correcting this imbalance. Furthermore, this will allow the leasing companies to diversify sources of funding and increase its leverage to improve returns on investment. It could also play a role in encouraging product development,"the report said.
The World Bank affiliate said that it could play a role in getting involved in the discussions between the representatives of the leasing sector and the government tax authorities to rationalize the tax system to make leasing competitive and conducive to do and ensure proper tax treatment for lessors and leeses.
PCI Leasing is considered the largest leasing company in terms of size, with total assets of about P3.7 billion and net worth of P2.8 billion as of year-end 2001. Equitable PCI Bank has total assets of P238 billion in end-2001, it is the third largest domestic commercial bank in the Philippines with a large distribution network (529 branches located throughout the country).
BPI Leasing is the second largest leasing company with total assets of about P3.5 billion and net worth of P1.01 billion. It is a wholly owned subsidiary of the Bank of the Philippine Islands (BPI), the second largest bank in the country, with total assets of P399 billion and net worth of P48.3 billion. – TPT