PBCom plans to sell P10-B NPAs

The plan of PBCom to sell an estimated P10 billion worth of non-performing assets is attracting a significant number of potential investors as the bank prepares for the auction within the next few months.

Banking sources told reporters over the weekend that at least 12 investor groups have expressed their intention to participate in the auction, boosting the bank’s chances of success in the wake of repeated failure by other banks.

The Special Purpose Vehicle Act (SPVA) has been in effect for almost two years now but not a single bank has been able to take advantage of the incentives offered by the government due to their refusal to take a loss when selling their bad loans and bad assets.

According to a top official of the Bangko Sentral ng Pilipinas (BSP), however, PBCom appears to be generating enough interest to increase the likelihood of success because the bank decided not to put down a floor price for its assets and loans on sale.

Unlike the failed attempt of the United Coconut Planters Bank (UCPB), the official said PBCom’s planned auction is "significantly more transparent".

Aside from this, PBCom also divided its assets for sale into two tranches, allowing prospective buyers some allowance for cherry-picking instead of lumping all the assets in one giant portfolio.

The sale of some of its NPLs and NPAs would improve PBCom’s portfolio. This sale is part of the agreement between the bank and the Philippine Deposit Insurance Co. (PDIC) which funded its P6-billion bail-out.

PBCom has already prepaid some P3 billion worth of loans from the Bangko Sentral ng Pilipinas (BSP) as the bank bounced back from last year.

According to the BSP, PBCom has been slowly paying back the loans which are not scheduled to mature until December this year. Sources said the bank initially secured about P2 billion from the BSP but the total aggregate amount reached P3 billion.

The BSP facility acted as an emergency loan to help the bank tide over the wave of withdrawals that ensued in the wake of aggressive in-fighting between the owners of the bank.

The BSP granted the loan to PBCom, supported by heavy deposits from tobacco and beer magnate Lucio Tan who is related by marriage to one of the bank owners.

According to the BSP official, the pre-termination of the loans indicated that PBCom had recovered some measure of financial stability as depositors started to return.

PBCom had been hit by a banks-run twice – the first in 2000 when it was sideswiped by the fall-out from the closure of Urban Bank of the Philippines.

The bank’s principal owners are among the country’s original Chinese taipans namely the Luys of International Copra Export and the Nublas and Chungs of La Suerte Cigarette.

After the BSP loan was approved, PBCom was finally rescued by the PDIC which appointed four directors and one consultant into the board of directors to oversee its rehabilitation.

Under the bail-out scheme, PDIC agreed to grant PBCom P7.64 billion in "financial asistance" over a 10-year period to buy government securities that would be pledged as collateral for the loan.

In return, the major shareholders of the bank committed to infuse P3 billion in capital as well as to sell P10 billion worth of bad assets that have been eyed under the Special Purpose Vehicle Act (SPVA).