Export Bank eyes foreign partner for SPV venture

The Export and Industry Bank (EIB) has started talks with a foreign financial institution for the formation of a special purpose vehicle (SPV) to dispose of some P1.7-billion worth of non-performing assets (NPAs).

"The bad debts garbage heap continues to stink," said outgoing EIB vice chairman Reynaldo G. David. "Thus we have decided to enter into a SPV transaction that is a bold venture into uncharted territory but the rational and right financial decision. It is the only way the bank can dispose of the NPAs that clogs the balance sheet."

David will assume the post of president and chief executive officer of the Development Bank of the Philippines (DBP) starting next month.

Meanwhile, EIB president and chief executive officer Benjamin P. Castillo said the bank will not be seeking a financial advisor. Likewise, Castillo admitted that they would be retaining the maximum allowable equity holdings in the SPV of five percent.

"We want to realize some of the benefits of the SPV, which we will be registering with the Securities and Exchange Commission (SEC)," he added.

EIB admitted that the longer they hang on to the bad assets, the more difficult it becomes to sell them. Without the SPV, it would take years for most banks, EIB included, to dispose of the NPAs and thus free up vital credit to fuel economic growth.

Pruning NPAs is crucial for the bank to complete its restructuring for more efficient allocation of resources and capital. It has practically completed the payment of its depositors and shareholders as part of the rehabilitation of the bank when it acquired Urban Banking Corp.

It will issue the third and final tranche of its Liabilities Servicing Plan (LSP) amounting to P2.7 billion. The entire plan resulted in payments amounting to P15.8 billion including interest earnings.

The LSP involves repaying two groups of bank clients who were "trapped" when Urban Bank closed down.

The first group is the more numerous. This is the group that will be issued the final tranche covering a three-year period starting 2002. The second group involves San Miguel Corp., Petron Corp. and Meralco, under a six-year payment period.

"All of the pieces and building blocks are now coming into place, and we will be back in a normal grove with the foundations in place," David added.

He however admitted that the restructuring and strengthening of its books including ensuring high liquidity would still reflect on lower net earnings this year. Stronger growth was however forecast in the next two to three years.

Meanwhile, the One McKinley Place, the property-development joint venture between EIB and the Concepcion group, is now 87 percent complete. Only 12 units remain and bank officials expect return on investments in the next few years.

Another marketing alliance with Century Properties allowed Exportbank Plaza to register a 93-percent occupancy rate. It is also a PEZA-accredited information technology zone building ideal for the contact service or the call center industry.

Castillo likewise revealed that Value Life Financials, its composite insurance subsidiary, has entered into a marketing venture with New York Life Philippines Inc.

"It is now generating fee-based income for the bank and a functional bancassurance model."