IFC, ADB mull joint venture to buy banks’ bad debts

The International Finance Corp. (IFC) said yesterday it plans to set up a joint venture with the Asian Development Bank (ADB) and other partners to buy bad debts from Philippine banks.

The details of the plan will be finalized after the government releases regulations for so-called special purpose asset vehicles (SPAVs) or asset management companies authorized to acquire and invest in banks’ non-performing loans.

IFC country manager Vipul Bhagat said the IFC and ADB "would be working with a local group and perhaps an international company which specializes in distressed debt."

Between $50 and $100 million will be invested in the joint venture, depending on the regulations, said Bhagat.

The ADB and the IFC, which is the investment arm of the World Bank, are in negotiations with potential local and foreign partners, Bhagat said, but he declined to identify them.

The two multilateral institutions will not be taking majority shares in the planned joint venture, Bhagat stressed.

Philippine President Gloria Arroyo on Jan. 10 signed a law which will allow the creation of SPAVs.

Such companies will be able to buy up billions of dollars of bad loans of commercial banks, strengthening the banking system and unlocking much-needed credit to fuel economic growth.

The Central bank said yesterday that the ratio of non-performing loans (NPLs) held by commercial banks fell to 16.27 percent of total loans in November from 16.36 percent in October. – AFP