Metrobank, Lehman Bros. form AMC

Metropolitan Bank and Trust Co. (MBTC) has taken P15 billion out of its non-performing loans in a deal with the US investment bank Lehman Brothers. The Bangko Sentral ng Pilipinas (BSP) has directed the bank to discuss the details of the transaction.

A top Monetary Board official told reporters that the board wants to know the particulars of the transaction for disclosure purposes. According to the official, the BSP has asked MBTC to submit a copy of the memorandum of agreement it signed with Lehman Bros.

MBTC and Lehman Bros. are said to have signed a MOA for the creation of an asset management company that will take the bank’s bad loans and turn them around for disposition.

MBTC has taken P15 billion out of its estimated P31-billion NPL portfolio but BSP officials said they have not been informed of the details of the transactions or how the bank intends to book the NPLs that have been taken out.

According to the official, banks are allowed in principle to take out portions of their NPL portfolio as long as there is a proper disclosure to the BSP. He said the central bank wants specifically to know how much was taken out at what discount rate, if any.

The official said the BSP wants to know how MBTC will book the transaction and what entries have been made in the bank’s book of accounts, "there are other details that we want to find out also, such as the question of whether there are subordinated debts involved," he said.

The official said that the BSP also does not know whether the AMC is already operational and if it is, what are its plans concerning the NPLs.

"We would also want to know if MBTC has investments on this AMC and to what extent," the official said.

The official said MBTC has been submitting the required documents "little by little."

Lehman was reported to have already earmarked $1 billion for a Philippine Recovery Fund that would take a lead role in buying the bad loans of local banks and the housing mortgage portfolio of some government agencies.

MBTC has already raised almost $100 million in tier 2 capital from the Singapore-based Dunmor Assets Ltd. Tier 1 capital, unlike straight out capital or a loan, takes the form of convertible bond issuance redeemable within a certain period. MBTC’s tier 2 capital has a 10-year maturity with a five-year lock-up period. It carried a 9.8-percent fixed rate for the first five years although the rate could go up by 100 basis points after the five-year lock-up period.

As of end September 2001, MBTC’s bad loans amounted to P30 billion, accounting for 17.21 percent of its total loan portfolio.