Investment firm ready to buy big banks’ bad assets of up to P2B

Alternative investment firm Whitestone Holdings aims to take out as much as P2 billion worth of bad assets from the books of major Philippine banks before the Financial Institutions Strategic Transfer (FIST) Act expires in February 2023.

Whitestone manages two FIST companies here: Philippine Equitable Recovery Company I FIST-AMC Inc., and Philippine Recovery Platform I FIST-AMC Inc.

The FIST law, passed in February 2021 at the height of the pandemic, allowed the creation of these companies specifically to buy the bad assets of banks.

In an interview with the Inquirer on Friday, Whitestone managing director Jethro Vasquez said his group was in “active discussions” with some of the country’s larger banks that want to unload their nonperforming assets.

“Even though they are probably the most well-capitalized banks in the Philippines, they are still more open to it and they think [that way] because they’re more professionally managed. So they think more like a bank or a banker, rather than a real estate guy. In the end, they think of it as noncore, nonperforming [asset], so let’s just convert it to cash, lend it out and just strengthen the balance sheet of the bank,” Vasquez said.

Stronger banks

The group is targeting to acquire at least P1.5 billion to as much as P2 billion worth of bad assets from a handful of big banks.

“Don’t get me wrong, it’s already strong, but I guess that you can make it stronger from their perspective,” he added.

Asked about the potential pricing of bad asset takeout deals, Vasquez said for real and other properties owned or acquired without legal issues, discounting by 40-50 percent could be possible after months of discussions.

For assets with legal issues, he estimated that banks may be willing to let go at 60-70 percent discount instead of holding on to these assets for five to 10 years more.

He noted this was still much better than in the aftermath of the Asian currency crisis of 1997, when special purpose vehicle companies were buying at 10 to 20 centavos per P1 worth of bad assets.

Real estate veteran Michael McCullough, who personally invested in Whitestone’s FIST company funds, said the group was mostly made up of Filipino investors. “So it’s not like a foreign vulture fund coming in here and taking advantage.”

—Doris Dumlao-Abadilla INQ