Gov’t to pay P7B for asset pool certificates

Suffering as it is from a chronic budget deficit, the government still has to cough up at least P7 billion to pay for maturing asset pool certificates (APCs) guaranteed by the Home Guarantee Corp. (HGC).

A well-placed official said HGC guaranteed some P10 billion to P12-billion worth of APCs for various government development projects, including projects completely unrelated to housing.

Of the total, the source said P7 billion is scheduled to mature this year and the Philippine National Bank (PNB) is not the only financial institution planning to call on their maturing investments.

PNB has been asking HGC to pay some P800 million worth of investments that it put on various public projects or else write off an equivalent amount from its P25-billion emergency loan now pending for restructuring.

According to the source, insistent investors consisting mostly of local banks, have been peppering HGC with impatient demand letters. In response, the government-owned and controlled corporation has been trying to negotiate for extensions in order to buy the government more time.

The HGC, the source revealed, had only about P30 million in its coffers and was therefore not in the position to settle even a small part of these maturing APCs without being rescued by the national government through emergency bridge financing.

The issuance of APCs had attracted not only PNB but also government financial institutions and commercial banks such as MetroBank and Union Bank. The proceeds of the APCs were originally intended for housing projects such as the Smokey Mountain Rehabilitation Project and the construction of the so-called Pabahay sa Riles, a project for the former scavengers that used to live in the former dump site.

However, the source said that the proceeds of the certificates were not all used for housing projects. The government also issued APCs to generate funds for projects not related to housing but still bore the guarantee of the HGC.

The source said the list of projects funded out of HGC-guaranteed APCs even included such projects as the rehabilitation of the Andres Bonifacio Monument in Caloocan City.

The source said the HGC also guaranteed APCs issued to raise funds for the construction of villas for the delegates that attended the Asia-Pacific Economic Conference hosted by the Philippines during the presidency of Fidel V. Ramos.

The preparations for the APEC Summit, which was attended by such dignitaries as US President Bill Clinton, included the construction of living quarters at the Clark Air Base and the Subic Freeport.

The APCs, the source said, were managed by other entities that were also charged to collect payment from subscribers but some of these entities never remitted the proceeds back to the government agency in charge of the project.

The source said HGC already had a P7-billion re-capitalization plan but this would require funding allocation from the annual General Appropriations Act which has so far only allocated P900 million.

HGC’s crisis would put pressure on the National Government which is struggling to keep its budget deficit within its target of P130 billion. Although it has so far been able to pace its spending, government’s contingent liabilities have been wreaking havoc on its annual budget.

The maturing claims against the APCs guaranteed by the HGC would add another P12 billion to the amount that government would have to assume since the HGC is not in the position to answer for these calls.

Bank sources revealed that the PNB wanted the government to initially pay for its P300 million in the Smokey Mountain Rehabilitation Project launched during the Ramos Administration.

According to the source, the PNB has already billed the HGC for the P300 million because it was the agency that granted the guarantee on the project.

The source said the bill was forwarded in March but PNB officials did not expect the government to actually pay up since this could blow its tight budget wide open and force it to miss its P130-billion budget deficit target for the year.

According to the source, the PNB wants the government to either pay up or include all P800 million in the on-going talks for the rehabilitation of the bank. This would mean that the P800 million that the government would have to pay could be off-set against part of the total amount that government still owned the bank for its various projects.