BPI unloads P8.6-B NPLs to Morgan Stanley via SPV

The Bank of the Philippine Islands (BPI) has sold P8.6 billion in non-performing loans (NPLs) to Morgan Stanley Emerging Markets Inc., marking the first successful sale of a local expanded commercial bank to a foreign asset management company (AMC).

The sale was also the second attempt by the Ayala-led commercial bank, the first having failed due to differences in price and discounts.

"It is a good deal, and we are happy to be rid of a big chunk of our planned sale," said Aurelio R. Montinola III, BPI senior executive vice president and chief operating officer.

BPI originally planned its NPL portfolio to be sold through the special purpose vehicle (SPV) route to range between P5 billion to P10 billion. BPI also wants to dispose of between P1 billion to P2 billion of ROPOAs (real and other properties owned and acquired).

The P8.6-billion deal will be structured under the SPV system of disposing bad assets. Morgan Stanley has reportedly filed its application with the Securities and Exchange Commission (SEC) for the formation of an SPV.

However, BPI officials could not give further details on the deal due to the presence of a clause requiring common disclosures by the two entities. The deal will be consummated sometime in November this year.

BPI, thus, could well be the first bank to beat the September deadline for the registration of an SPV, as well as successfully complete the sale of bad assets.

In 2003, a consortium composed of local and foreign firms, was formed to acquire between P5-billion to P10-billion worth of BPI‚s ROPOAs. The International Finance Corp., the private investment arm of the World Bank, would have been involved in the financing of the SPV had the deal been consummated.

Five other commercial banks, meanwhile, are involved in talks with AMCs for the formation on an SPV. They include the Land Bank of the Philippines (LBP), the Rizal Commercial and Banking Corp., and the Philippine Bank of Communications (PBCom).