The Market Monitor Minding the Nation's Business
By Riza Lozada
Listed mass-housing developer 8990 Holdings Inc. has tapped China Bank Capital Corp. to arrange and underwrite the securitization of up to P5 billion of contract to sell (CTS) receivables of its property development subsidiaries.
8990 Chairman Mariano Martinez had signed the mandate with China Bank Capital Corp. President Romy Uyan Jr. and Director Manolo San Diego for the first purely private sector and largest housing securitization deal in the country.
China Bank Capital is the investment banking subsidiary of China Banking Corp., one of the largest domestic universal banks.
8990 President and Chief Executive Officer Januario Jesus Atencio III said a trailblazing moment for 8990 as well as the mass-housing sector.”
The P5-billion securitization mandate given to China Bank is the largest securitization deal ever to be assembled in the Philippines and it opens up a whole new horizon for housing finance in the country, he added.
Under the deal, the investment arm of China Banking Corp., China Bank Capital has been mandated to arrange and underwrite the securitization of up to P5 billion of receivables of 8990’s property development subsidiaries.
Under the proposed securitization, 8990’s subsidiaries will sell receivables to a special purpose company (SPC) of China Bank Capital, which will then issue three tranches of asset-backed securities (ABS) to investors.
The SPC shall use the cash flows from the receivables to make principal and interest payments to the ABS investors until each tranche is completely paid in order of seniority.
The plan will be subject to the Securities and Exchange Commission (SEC) approval.
8990’s proposed securitization is expected to be the largest securitization under the Securitization Act of 2004.
Last March 16, 8990 inked a deal to sell P2 billion worth of in-house CTS receivables with Security Bank Corp. 8990 signed an agreement with BPI Family Savings Bank for the purchase of its CTS receivables worth P1 billion in October last year.
Last March 16, 8990 Holdings subsidiaries, 8990 HDC, 8990 Luzon, 8990 Davao and Fog Horn signed a memorandum of agreement (MOA) with Security Bank Corp. (Security Bank) for the purchase of P2 billion of 8990’s CTS portfolio.
“This shall be on a non-recourse basis, and we expect that the actual sale to take place in April after Security Bank’s due diligence of individual accounts,” Atencio said.
“The agreement signifies a serious interest to partner with 8990 and establish for the mass housing sector a viable alternative for housing finance in the Philippines. For 8990, the purchase of our receivables indicates the growing satisfaction and confidence of Banks on the quality of our buyers, our credit evaluation procedures, and our credit and collection platform,” he said.
Atencio expects to pursue similar arrangements with other banks and financial institutions in the near future.
The first purchase of 8990’s receivables worth P1 billion was done last year with BPI Family Bank as buyer, said an 8990 report to the bourse.