UCPB starts negotiated sale

The United Coconut Planters Bank (UCPB) has decided to negotiate with an investor or an asset management company (AMC) for its P13.5-billion bad assets after two failed attempts via the public auction route.

The unnamed foreign investor, in fact, had participated in the July 19 and the Aug. 9 auctions. But like the rest of the field, the pricing scheme fell below the reserve price.

The good news is that the said investor has already formed its own SPV, thus unhampered the Sept. 18 deadline for registration with the Securities and Exchange Commission (SEC). Only registered SPVs can avail of tax, fees and other incentives embodied in the Special Purpose Vehicle (SPV) Law of 2002.

Higinio O. Macadaeg Jr. UCPB executive vice president and chief credit officer revealed that the bank would also be registering one or two bank-owned SPVs.

That would allow UCPB more flexibility whether the negotiations fail, or if the September deadline is not extended, or if the deal is consummated with another investor without a registered SPV.

However, the bank-owned SPV(s) will be sold to the winning buyer with the bank preferring to stay clear of the SPV.

"This is an outright sale. We will not keep any equity in the SPV. We want to get rid of the bad assets, and the SPV," Macadaeg said.

After the two failed auctions, direct negotiations had been the favored option. In fact, the investor already submitted a new offer, which the bank again rejected, but offered time for further negotiations.

Yet UCPB has a third option.

During the July and August public bidding, several investors stood in the sidelines as their policy disallowed them from joining auctions but rather preferred the negotiated sale route.

The UCPB executive vice president revealed that there were two or three such investors that expressed the desire to negotiate.

From the original P18 billion, it was trimmed down to P15 billion by the July 19 auction. It was further reduced to P13.5 billion in August.

Bank officials revealed that the prospective buyer is looking at only between P9.5 to P10 billion worth of ROPOAs (real and other properties owned and acquired), mainly located in areas around Metro Manila.

The bank’s final auction is to again manage the bad assets looking direct sales, joint ventures, and one-on-one sales.

Macadaeg admitted that there seems to be a lot of uncertainty and political risk factors dictating on the way the investors are acting, and pricing their offers. There is the issue of foreign ownership of Philippine properties. "And we (the Philippines) are not their first option for buying bad assets of banks."

Global player PricewaterhouseCoopers is the commissioned financial advisor.

The UCPB has an outstanding ROPOA of between P20 P22 billion, including those being sold thru the SPV. Its NPL stood at a high P18 billion. – Ted Torres