HGC to tap domestic sources for loans

MANILA, Philippines - State-run Home Guaranty Corp. (HGC) is hoping to tap the domestic market by April to take advantage of strong investor appetite as seen from the success of the nearly P12-billion bond issue of Home Development Mutual Corp. or Pag-IBIG Fund last week, HGC president Gonzalo Bongolan said in an interview.

Bongolan said the agency is still waiting for the greenlight from the Department of Finance (DOT) to issue P5.5 billion in 10-year bonds which had been planned as early as last year.

“We have P3 billion in maturing debt next year so P3 billion of the proceeds would go to refinancing,” he said, adding that the balance of the proceeds would be used to build up the agency’s guaranty reserves.

At present, the HGC’s guaranty fund amounts to P1.8 billion.

HGC is a government-owned and controlled corporation mandated by law to extend guarantee cover to all bond issuances of other state-run firms.

The last time HGC operated with no unpaid guarantees was in the middle 90s before the Asian financial crisis hit the country.

Nonetheless, Bongolan said that from a P16 billion total obligations in 2001, the agency was able to trim it to just P3.5 billion.

The HGC bonds are expected to have a rate of 0.9 percent of the yield fetched for the benchmark 10-year bonds being auctioned by the Bureau of the Treasury (BTr).

Bongolan said the bonds would also have the usual “sweeteners” such as the guarantee cover of the national government and that it would be tax-free unlike the regular debt papers issued by the Btr.

He also said that the HGC issue would have the sweeteners of the Pag-IBIG bond float.

The Pag-IBIG bonds serve as alternative compliance by banks with  the Agri-Agra Law and counts as reserve assets of insurance companies and compliance with the Urban Housing Development Act.

Last week, Pag-IBIG Fund successfully sold P11.963 billion in five-year bonds, proceeds of which would be used to refinance existing debts and finance existing programs.   

If HGC’s bond offer pushes through, this would be the agency’s fourth bond sale since 2002 where it floated P7 billion worth of debt papers.

In 2004 and 2006, the HGC sold P3 billion and P12 billion worth of bonds, respectively.

If on the other hand, HGC won’t be able to raise funds through the bond sale this year, it would be under heavy pressure to provide guarantee services to home buyers.