Plantersbank, IFC form $71-M SPV

MANILA, Philippines - Planters Development Bank (Plantersbank) and the International Finance Corp. (IFC) have established a special purpose vehicle (SPV) with a distressed asset portfolio worth $71 million (nearly P3 billion).

The SPV acquired Plantersbank’s non-performing loans (NPLs) and real and other properties acquired (ROPAs) of the said combined value.

The distressed asset project is presently awaiting final IFC board approval, expected to be mainly ceremonial. After the board gives the green light, the project will seek the approval of the Bangko Sentral ng Pilipinas (BSP).

The private investment arm of the World Bank said that the project offered an opportunity for Plantersbank to increase lending by transferring its bad assets to another entity.

The thrift and development bank specializes in servicing the small and medium enterprises (SMEs).

But it is forced to set aside capital to services its bad assets thus reducing the amount that could have otherwise been lent to the country’s productive sector.

The World Bank has a clear bias towards the SME sector, or entities that share the same passion but are hampered by distressed assets such as NPLs.

“Through the proposed project, IFC can play a critical role to help re-activate the distressed asset market in the Philippines, mobilize funding from the private sector to help address the limited capital currently available in the local NPL market,” the global financial institution said.

The $71-million SPV project is part of the investment arm’s Debt and Asset Recovery Program (DARP), which is a crisis response initiative addressing distressed assets, roll over risk and restructurings.

“DARP’s strategy is to revitalize financial systems through investments in distressed assets and servicing companies/platforms,” it said.

However, Plantersbank cannot fully release its funds for lending to SMEs.

In 2005, the thrift bank formed an SPV to manage its bad assets worth P2 billion. It is still being serviced while it is forming a new SPV with the IFC.

Unnamed bank officials meanwhile said that they were optimistic that with the additional SPV, it would be able to resume aggressive lending to its target market.

“We are also open to additional partners willing to invest in our double bottom-line principal of serving SME and making a profit at the same time,” the officials added.

In 2011, Plantersbank reported a net income of P300 million, down 10.5 percent from the P355 million reported in 2010. The year before, the thrift and development bank recorded earnings at P332 million.

It reported a loan portfolio of P37 billion with over 60-percent of total lending devoted to the SME sector. However, it had bad assets worth P6-billion.

Capital adequacy ratio (CAR) stood in the vicinity of 13 percent.

Plantersbank has institutional shareholders that include the Asian Development Bank (ADB), the Netherlands Development Finance Co., the Korean Development Agency, and the IFC.