8990 Holdings Inc., one of the country’s biggest mass housing developers, is selling as much as P2.4 billion worth of securities backed by housing receivables. This will be the first private sector-led residential mortgages securitization deal in the Philippines, paving the way for other developers to tap this financing option.
The company plans to issue the securities in two parts: class A certificates worth P1.8 billion and subordinated class B certificates amounting to P600 million, according to credit watcher Philippine Rating Services Corp. (PhilRatings).
PhilRatings rates the class A securities PRS Aa plus, indicating that the obligation is of high quality and subject to very low credit risk. The class B securities are rated PRS A, which suggests that the issuer’s capacity to meet financial commitment is still strong, although the obligation is susceptible to any adverse impact of changes in economic conditions. Both ratings have a stable outlook.
“The company and its in-house financing portfolio have been riding on the back of steady economic growth in the past decade and have yet to experience a significant economic downturn,’’ PhilRatings said in a statement.
8990 Holdings’ class A certificates have significant protection through credit enhancements, including a cash flow guarantee from the government via state-owned Philippine Guarantee Corp. Such guarantee will address any shortfall to obligations to the class A certificates until they’re fully settled. Accrued interest payments to the class B certificates will only be paid out once the class A securities are fully paid.
The company’s receivables portfolio historically has high recovery rates and quick recovery times. “Repossessed houses have buyers lined up even before litigation is concluded. The strong demand for the company’s products is supported by the current housing backlog,’’ PhilRatings said.
The developer plans to double its capital expenditure to P20 billion this year as its largest Metro Manila project, the Urban Deca Homes Ortigas launched in July 2019, starts contributing to revenue, the company said last year. It has started its high-rise building project Urban Deca Towers in Edsa Shaw and plans to expand outside Metro Manila.
As of end-2018, 8890 had completed 57 mass housing projects and was developing 11 more projects. Its completed and ongoing development projects consist of about 60,000 housing units. INQ