HGC reviews APC-funded projects

MANILA, Philippines - Home Guaranty Corp. (HGC) president Manuel Sanchez created Task Force APC to review all HGC-guaranteed projects funded through Asset Participation Certificates (APC).

APCs are alternative sources of funding involving the issuance of securities backed up by an asset pool. In an APC-funded project, the developer pools real estate assets as security and conveys the same to a trustee bank who administers the asset pool and acts as nominal issuer of the APCs. APCs are guaranteed by Home Guaranty Corp. in the event of default by the developer.

In line with its mandate to mobilize private capital for housing, HGC, from 1994 to 2000, guarantees 17 separate APC-funded projects to develop mass housing, resettlement and relocation sites, among others. Within a few years after they began, 15 of these projects failed resulting to calls on the HGC guaranty.

“What is startling,” according to Sanchez, “is that HGC religiously paid the project funders whatever amounts they claimed as guaranty calls.” Sanchez also cited that almost all assets conveyed in return for the guaranty payments are overvalued and underdeveloped. Some are even raw provincial lands, occupied by informal settlers or with various legal issues. The real value of most of these assets amounts to just a fraction of their claimed value at the time of the guaranty call and their subsequent payment.

The review is part of HGC’s ongoing efforts to tighten-up its guaranty system, specially its guaranty call procedures, and look for ways to improve its guaranty business in general. HGC invited the Office of the Government Corporate Counsel (OGCC) to send a permanent member to the Task Force to help cause the failure of these projects. “Mistakes were definitely made” according to Sanchez, “and we are resolved to get to the bottom of these so that they never happen again.”