LOW-COST housing developer 8990 Holdings Inc. said it may sell some P11 billion worth of receivables, in the form of contracts-to-sell (CTS), to banks or for securitization this year.
8990 President Januario Jesus Atencio said the amount is part of thier P19 billion worth of CTS portfolio, a combination of home buyers that it had accumulated over the years and also new contracts.
Atencio said he is talking to four banks to buy all of these CTS, which the company said is mostly composed of home buyers that have a good track record of paying their dues on time.
8990 said only 4 percent of its CTS are delinquent payers and the rest are current.
“One bank will buy CTS for P5 billion, another for P4 billion and two for P1 billion worth of CTS each,” Atencio said.
The company will be left with about P8 billion in CTS, but half of that will go to the Home Development Mutual Fund.
Atencio said the company will have P4 billion in CTS that will remain in portfolio, some of which may be used when the government gave a green light on its securitization program.
“But there will be P6 billion in new CTS coming this year,” he said.
Atencio said banks prefer to buy receivables that have been seasoned for a year, or home buyers were able to pay on time for a period of one year and, thus, more less likely to default.
Banks find 8990’s receivables attractive, since they carry a yield of 9.5 percent. The banks can give their clients a yield of 7 percent and pocket the remaining 2.5 percent as profit.
“They’re saying, if you have a yield of 9 [percent], I can get it all, do a private securitization and I can sell these to my high-networth VIP clients,” Atencio said.
He said the foreign lenders they are talking to are offering a private securitization of the receivables in Singapore, where the process is faster.
The company has been having difficulty convincing the Securities and Exchange Commission to allow it to securitize its receivables, even though its application has been with the regulator for about a year.
According to its earlier plan, the measure involved securitizing P1 billion worth of receivables or CTS 8990 accounts. Some 85 percent of these will be converted into a 12-year note with a 7.5-percent coupon rate and a yield of 11.5 percent per year.
The remaining 15 percent will be used as subordinated debt or a credit enhancement that will be used in case the house owner pre-terminates his contract or decided to pay the unit in full.