SEC greenlights NHMFC plan to issue fresh ‘balai’ bonds

The Securities and Exchange Commission (SEC) has approved the state-run National Home Mortgage Finance Corp.’s ­(NHMFC)­ plan to raise P319.32 million from a limited offering of debt paper backed by cash flow from its housing loan portfolio.

This will be NHMFC’s fourth time to sell securities with housing receivables as underlying assets. Securitization is a rare transaction in the local financial market.

NHMFC is the agency mandated to provide homebuyer’s financing in the country.

The SEC en banc approved on Dec. 10 the securitization plan of NHMFC, albeit still subject to the fulfillment of certain conditions.

Under the securitization plan, NHMFC will create a pool of 1,291 long-term secured residential loans and put them into a special purpose trust known as “Balai” bonds 2 special purpose trust (Balai bonds 2 SPT).

Following the sale, the Balai bonds 2 SPT will issue P319.32 million in asset-backed securities, consisting of P150 million in class A senior notes and P169.32 million in class B subordinated notes.

Proceeds from the issuance will then be used to pay the ­NHMFC the purchase price for the residential loans, allowing the government agency to free up cash for lending to more people.

Land Bank of the Philippines will serve as the underwriter for the issuance of the notes.

The Balai bonds 2 are exempt from registration, as they will be issued to no more than 19 qualified institutional investors in the Philippines.

The Securities Regulation Code exempts the registration of securities sold or offered for sale to fewer than 20 persons in the Philippines during a 12-month period.

Balai bonds 2 follows a similar securitization structure as NHMFC’s previous issuance, whereby it transferred P270.25 million in long-term secured residential loans to Balai bonds 1 SPT in December 2019.