Cerberus bypasses RP, invests $500-M in Thailand

Dismayed by the delay in the passage of the SPAV law, the US-based Cerberus Capital Management, L.P. has bypassed the Philippine banking industry and instead invested $500 million buying bad loans in Thailand where the laws on asset management companies are more transparent.

Known as a leader in the international distressed debt, securities and reorganization market, Cerberus has invested over $20 billion in the market and has an available capital in excess of $7 billion that it plans to invest in Asia, specifically Japan, Korea and Thailand.

Sources from the Department of Finance (DOF) revealed over the weekend that Cerberus is no longer willing to wait for Congress to pass the law on special purpose asset vehicles (SPAV).

Early this year, Cerberus announced that it was planning to invest more than $1 billion in the country, specifically on non-performing assets that it planned to buy from banks as soon as the legal framework for the disposition of problematic assets has been set.

Instead, Cerberus has made its move into Thailand and invested half of the fund it had originally intended to invest in the Philippines. This leaves some $500 million that could still go into the country but the source said even this half could go elsewhere unless the SPAV law goes through in time.

Cerberus’ investment would have helped ease the banking industry’s non-performing loans (NPLs) ratio now estimated at 18.06 percent of the industry’s total loan portfolio or P288.97 billion.

When Cerberus started looking into several banks in the country, the company said the only limiting factor to the company’s investments in the Philippines was the number of opportunities and the legal framework that would govern SPAVs.

Cerberus senior adviser Car D. Jackson said at the time that the company was committed to invest about $500 million in the housing sector and another $500 million on corporate restructuring but this amount could easily go up once the company finalizes its planned partnership with Goldman & Sachs.

However, Jackson said Cerebrus was waiting for the passage of the SPAV law since this would have a direct impact on its planned investments in the country. "You don‚t know the law until it is passed so we are waiting for it to actually pass before going into any specifics," he said. "The longer these assets are in limbo, the less they’re worth," he pointed out.

Even in the beginning, Jackson warned that although there was ready capital that could be invested immediately, the Philippines was competing with other countries in the region which presented similar opportunities for acquisition, rehabilitation and resale.

As of March this year, Cerberus has spent roughly $2 billion in Japan, $500 million in Korea and several billions in Thailand. On the whole, he said the company plans to invest between $2 to $3 billion in Asia.

Cerberus was planning to acquire and resell foreclosed assets of government housing institutions, particularly, the National Home Mortgage Finance Corp. (NHMFC), the National Housing Authority and the Pag-ibig Fund.

At the same time, Cerberus was also planning to go into a $500-million venture that would essentially involve establishing a business recovery vehicle for ailing companies. – Des Ferriols