MASS housing developer 8990 Holdings Inc. is trimming its receivables by P2 billion through an agreement entered into with listed Security Bank Corp.
In a statement, 8990 Holdings president and CEO Januario Jesus Atencio 3rd said the company signed a memorandum of agreement (MOA) with Security Bank for the purchase of its in-house contract to sell (CTS) receivables worth P2 billion on a non-recourse basis.
8990 said the agreement, signed on Wednesday, accounts for the firm’s subsidiaries, namely 8990 HDC, 8990 Luzon, 8990 Davao as well as Fog Horn and Security Bank.
Atencio said the actual sale is set take place in April.
“We expect that the actual sale will take place in April after Security Bank’s due diligence,” Atencio said, “with the purchase value based on the outstanding principal balance.”
He added that the receivables must be seasoned for at least 12 months and have no past due experience in the past 12 months.
According to Investopedia, seasoning refers to the length of time a debt security has been publicly traded and determines if a premium should be made for the security in the secondary market.
Under the agreement, Atencio said that 8990 will act as the collecting agent of the transaction, and shall be paid by Security Bank a collection service fee based on the amount it will collect.
Atencio said banks are showing serious interest to partner with 8990 and that they will pursue similar arrangements with other banks and financial institutions.
“The agreement with Security Bank signifies a serious interest for banks to partner with 8990 and establish for the mass housing sector a viable alternative for housing finance in the Philippines,” Atencio said.
Last October, 8990 Holdings signed an agreement with BPI Family Savings Bank for the purchase of its in-house contract to sell (CTS) receivables worth P1 billion.
“For 8990, the purchase of our receivables indicates the growing satisfaction and confidence of banks with regards to the quality of our buyers, our credit evaluation procedures, and our credit and collection platform,” Atencio said.
In 2015, 8990’s CTS portfolio increased 35 percent by value to P18.99 billion from P14.11 billion posted in 2014.
In terms of units, its portfolio increased 30 percent last year to 20,330 housing units from the 15,597 units registered in the previous year.
The developer said interest income derived from CTS increased by 34 percent to P1.2 billion in 2015 from the P901 million posted in 2014.