Finance Secretary Jose Isidro N. Camacho said yesterday that the amount would the part of the government’s equity contribution to the fund whose problems reached crisis proportions due to high loan default rates.
"This amount has already been appropriated by the Department of Budget and Management," he said. He said the bail-out was likewise expected to jump-start the low-cost housing industry.
Camacho told reporters that the capital infusion has already been approved by Congress and is contained in the 2003 General Appropriations Act (GAA).
According to Camacho, the funds would be infused in four quarterly installments although he admitted that this would not be enough to completely bail out the company.
"There will be a capital infusion in the next 12 months but we are still looking for additional properties to infuse into HGC and strengthen its financial conditions," Camacho said.
However, he said about P4 billion worth of assets would be infused into HGC although he added that HGC and the Department of Finance (DOF) have not finalized the list of properties that would be turned over to HGC as part of this financial strengthening effort.
HGC has been in need of a bailout since last year when it had to pay for at least P7 billion worth of maturing asset pool certificates (APCs). It planned to raise funds through a bond offer but credibility problems caused the offer to fail as the government rejected its lobby to add various sweeteners to the bonds.
HGC guaranteed a total of P10 billion to P12 billion worth of APCs for various government development projects, including projects completely unrelated to housing.
The bond was qualified as an acceptable compliance with the Agri-Agra Law which required banks to set aside 25 percent of their loanable funds for agriculture.
HGC also asked the Bangko Sentral ng Pilipinas (BSP) to qualify the bond as liquidity reserve but this was rejected by BSP Governor Rafael Buenaventura who said additional incentive was not necessary since it already had the full guarantee of the National Government.
HGC’s problem stemmed from the APCs that it guaranteed, whose proceeds were originally intended for housing projects.
The APCs 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.
Sources earlier said that 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.
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. – Des Ferriols