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8 Lehman SPVs owe 2 banks P3.6B

By Doris Dumlao
Philippine Daily Inquirer
First Posted 01:53:00 09/24/2008

Filed Under: Crisis, Banking, Financial & Business Services

Bankrupt American investment banking icon Lehman Brothers Holdings Inc., which gobbled up bad assets from Philippine banks in bulk over the past four years, has at least eight Philippine special purpose vehicles (SPVs) whose underlying assets local creditors are now running after, top banking sources said.

Lehman has taken out soured loans and foreclosed property at a steep discount from various Philippine banks using the SPV framework, but it also borrowed about P3.6 billion from two banks?Metropolitan Bank and Trust Co. (Metrobank) and the local branch of UK-based Standard Chartered Bank?to pay for the purchase of these assets.

Banking sources said the $26-million (P1.2 billion) exposure of Standard Chartered to Lehman represented loans to such SPVs. These SPVs were identified as Philippine Investment One and Philippine Investment Two, Argoman Real Estate Investments Inc., Galli Poli I Real, Galli Poli Real, Lobos Real Estate, Saturn Investment and Teak Real Investment.

The eight SPVs were not included in the petition for protection against creditors filed by Lehman in the US when it recently declared bankruptcy. They contain assets sold by various banks to Lehman during the past four years.

?The banks with loans to SPVs can recover some of their exposure by simply foreclosing on the underlying assets,? an investment banker said.

Metrobank announced on Monday a petition to put two of Lehman?s SPVs under court-assisted rehabilitation as part of efforts to recover its investments. It previously disclosed having lent P2.4 billion to two Lehman SPVs?Philippine Investment One and Philippines Investment Two.

The SPV law?which was passed in December 2002 and expired after May this year?helped banks get rid of their nonperforming assets by waiving some of the taxes and reducing fees usually collected in the sale or transfer of assets. The law waived the documentary stamp tax, capital gains tax and expanded value-added tax and also reduced the registration/transfer fees by half.

Lehman had been actively buying distressed assets across the region, particularly in Korea, Japan, China and Indonesia. In the Philippines, among the banks which were able to sell bad assets in bulk to Lehman were Rizal Commercial Banking Corp., the former Equitable PCI Bank (since acquired by Banco de Oro Unibank), United Coconut Planters Bank and Development Bank of the Philippines.

Metrobank?s total exposure to Lehman is $71 million, of which $51 million represents indirect loans to the US investment bank?s SPVs.



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