DOF downplays Cerberus decision

The Department of Finance downplayed the decision of Cerberus Capital Management to invest in Thailand instead of the Philippines, but admitted that the Arroyo administration needs to undertake steps to improve the country's investment climate.

Finance Secretary Jose Isidro Camacho said yesterday that Cerberus‚ move did not automatically disqualify the Philippines from its investment portfolio although there is a need to set the right investment climate in order to attract not just Cerberus but other investors as well.

"It’s not a zero sum gain," Camacho said. "But we’d better get our investment climate in shape. With the right set of investment incentives, investments will come in."

Cerberus' decision was precipitated by the failure of Congress to pass the Special Purpose Asset Vehicle (SPAV) law which would provide the legislative framework for asset management companies wishing to buy bad loans and assets from banks in order to turn them around and ultimately re-sell them.

Cerberus had announced early this year that it was planning to invest $1 billion in the country but it had decided instead to invest half of this amount in Thailand where it has previous investments.

Known as a leader in the international distressed debt, securities and reorganization market, Cerberus had 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.

Cerberus’ investment would have helped alleviate the banking industry’s non-performing loans 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, an amount which 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 had 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 $2 to $3 billion in Asia.

Cerberus plans 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.