Landbank ready to pick advisor for sale of NPLs

After extensive discussions, the Land Bank of the Philippines (LBP) has expressed preference for a single financial advisor, with another as a fall-back option.

Without naming a specific group, bank sources said the first option has a good track record here and abroad." This same group is advising a government financial institution (GFI) burdened with huge bad assets mostly in the property and housing sector. It made offers for financial consultancy and debt repackaging to several domestic commercial banks.

But the same sources said that they are not satisfied with certain conditions, which remain under negotiations. "We would want further improvements in some of their offers," they said while refusing to go into specifics.

The winning bidder would also have to contend with a "moving target." For instance, the bad assets may change as the bank continue to look for interested buyers or restructure the bad assets.

Bank officials said that repackaging the basket of bad assets would be done in phases, like a moving target. "They are trying to dispose of the bad assets; If we are able to dispose of some bad assets on our own, that may also change the extent of the assets for disposition."

The second option is a familiar name in the country’s financial circles, having been involved in financial advising and the local bond market for financial institutions and corporates.

As of last November, the LBP entertained four foreign institutions offering to repackage the company’s burdensome bad assets worth over P26 billion. These are: Ernst and Young, Price- waterhouseCoopers, KPMG, and Credit Lyonnaise SA.

Earlier, LBP president and chief executive officer Gary B. Teves said some P20 billion in bad assets would be disposed of. These consist of P15 billion in non-performing loans (NPLs) and P5-billion in ROPOA (real and other properties owned or acquired).

The four interested parties made formal presentations which would be reviewed by a technical committee which in turn would present it to the bank’s board, including the finance secretary.

The appointed financial advisor will then review and repackage the selected bad assets for sale. The strategic repackaging would be the basis for the fundamentals and pricing of the assets.

The LBP will then invite interested asset management companies (AMCs) to form a special purpose vehicle (SPV) or special purpose asset vehicle (SPAV) company wherein the government bank would have a five- percent stake.

The bad assets that may end up on the auction block are major commercial properties within Metro Manila, properties within the Fort Bonifacio and the Filinvest controlled areas, and major residential areas within and outside Metro Manila.