Landbank’s bad assets ready for scrutiny; P17B at stake

After the long wait, the Land Bank of the Philippines (LBP) has finally scheduled Sept. 15 as the start of the due diligence period, and Oct. 27 for the public bidding of its P17 billion bucket of bad assets.

At stake is P14 billion in non-performing loans (NPLs) and P3 billion in real and other properties owned and acquired (ROPOA).

The due diligence period allows interested parties to review the bad asset package and other pertinent information related to the acquisition of the same.

Ernst and Young (E&Y) is the bank’s financial advisor, which put together the bucket of LBP’s bad assets.

Omar T. Salvo, LBP vice president for corporate finance said the bank’s NPL ratio is expected to drop to the single digit level should the bank successfully rid its self of the unwanted "fat."

At the start of the second quarter, its NPL ratio stood at 14.7 percent, although its ROPOA grew to P15.4 billion.

The LBP would be registering their special purpose vehicle (SPV) this week without entering into a joint venture with an asset management company (AMC). The SPV is a joint venture between the bank and an AMC.

Most commercial banks anticipate that they would not be able to beat the September deadline. Under the SPV Law of 2002, banks must register the SPV with the Securities and Exchange Commission (SEC) if they are to avail of the incentives embodied in the law.

But banks can register the SPV and embody it in the joint venture agreement with the AMC, and still avail of the incentives.

The LBP is also holding talks with the Bangko Sentral ng Pilipinas (BSP) to fine tune the terms of payment and equity with the AMC prior to being issued the certificate of eligibility (COE), another requirement of the SPV Law.

Early this year, the bucket was worth P20-billion. However, the bank removed P1-billion in NPLs and roughly P2-billion in ROPOAs.

So far, the Bank of the Philippine Islands (BPI) and the Rizal Commercial and Banking Corp. (RCBC) have successfully formed their respective SPVs allowing for the ultimate removal of its bad assets in its books.