Leading mass housing developer 8990 Holdings plans to halve its portfolio of housing receivables by end-2017 by selling more of these earning assets to financing institutions and launching a pioneering securitization deal that will bring to the local market as much as P7 billion in debt paper backed by such assets.
In a briefing on Friday, 8990 Holdings chair Mariano Martinez said the company was working with China Bank Capital on a P3-billion securitization program which could happen by June or July next year.
As this could potentially be the country’s first private sector-led issuance of asset-backed securities, 8990 Holdings had been advised to work on an initial P3 billion to test the waters. In case of strong demand, Martinez said another P4 billion asset-backed issuance could be launched toward the end of 2017.
Under the proposed securitization deal, 8990 Holdings’ subsidiaries will sell contract to sell (CTS) receivables to a special purpose company, which will then issue the asset-backed securities to investors. The special purpose vehicle will in turn use the cash flows from the receivables to make principal and interest payments to the investors until each tranche is completely paid in order of seniority.
The pioneering securitization initiative seeks to allow 8990 Holdings to unlock liquidity from its CTS portfolio as they will be bundled into securities which will be offered to investors.
As of end-September, 8990 Holdings’ CTS portfolio amounted to P21 billion as of end-September this year. About 72 percent of the portfolio had tenor of 21 to 25 years.
Aside from the securitization program, 8990 Holdings also intends to sell more of these receivables to banks which want to scale up their consumer lending portfolio. By next year, Martinez said 8990 Holdings would like to sell around P4 billion of such CTS portfolio to banks. Combined with the P3 billion first tranche of securitization plan, this will trim CTS portfolio to P14 billion. —Doris Dumlao-Abadilla