The sale of the government’s majority stake in United Coconut Planters Bank (UCPB) will improve the lender’s capitalization and credit quality moving forward, debt watcher Moody’s Corp. said on Thursday.
“A successful privatization of UCPB will help the bank raise new equity capital to meet Basel III capital requirements, a credit positive. And, if a larger bank acquires UCPB, we expect that UCPB’s credit quality would benefit from the support of its new majority shareholder,” Moody’s said in a statement.
Last week, Finance Secretary Carlos G. Dominguez III disclosed that the Department of Finance (DOF) will soon start privatizing UCPB, after the Supreme Court (SC) lifted this month the halt order it had issued to implement Executive Order (EO) No. 180 signed by former president Benigno Aquino III.
To recall, the SC put on hold in June 2015 the implementation of EO Nos. 179 and 180, which would have set into motion the privatization and reconveyance to the government of about P74.3 billion in coco levy funds that the high court earlier declared as public funds.
According to Moody’s, “if the privatization and recapitalization are successful, the new equity capital will support UCPB’s growth and maintain its minimum Tier 1 capital ratio above a 10-percent requirement that includes a capital conservation buffer required for all Philippine banks.”
Also, Moody’s noted that “in contrast to the government, UCPB’s eventual new majority shareholder likely will view UCPB as a strategic addition to its domestic operations.”
As such, Moody’s said it expects that “the new shareholder will support UCPB, a credit positive for UCPB’s depositors and creditors.”
“Although no details have been released by either the government or the bank, we expect the terms of the recapitalization plan by first-quarter 2018, shortly after the government and the bank restart the planning work that was done during the last privatization attempt,” Moddy’s said.
“Mr. Dominguez said that the recapitalization program for UCPB should be pursued quickly because the government does not intend to extend the financial assistance for the bank beyond the expiration of the rehabilitation plan at the end of 2018,” it added.
Due to the earlier temporary restraining order issued by the SC, the Privatization and Management Office (PMO) announced in July 2015 that it “temporarily suspended” the planned sale of the government’s controlling stake in UCPB.
The PMO had been in the process of disposing the government’s UCPB stake, targeted to be concluded in September 2015, through a privatization scheme that will require the winning bidder to not only acquire the government equity but also infuse fresh capital into the bank.
The DOF-attached agency that disposes of public assets had required recapitalizing UCPB by at least P15 billion through subscription to up to 37.2 billion primary common shares, as well as called for the outright purchase of at least 1.106 billion common shares held by the government or 73.9 percent of the bank.
The floor price had been set at P1 per share, hence, entailing a total investment of at least P16.1 billion.
The PMO had received 12 letters of intent from local and foreign banks as well as private equity firms eyeing to buy UCPB. /kga