8990 Holdings, Inc. has gained conditional approval from the Securities and Exchange Commission (SEC) for its plan to securitize P2.13-billion contract-to-sell receivables.
In a statement on Thursday, the corporate regulator said it has “considered favorably” the application of 8990 to securitize its receivables, provided the company fulfills certain conditions. These conditions include getting the final credit rating for the certificates from a debt watcher, among others.
Securitization is the process of transforming an illiquid asset into a security through quantitative analysis.
8990, together with subsidiaries 8990 Housing Development Corp., 8990 Luzon Housing Development Corp., 8990 Davao Housing Development Corp. and Fog Horn, Inc., are planning to sell receivables from about 2,511 contract-to-sell accounts to CBC Assets One (SPC), Inc. The receivables have an original term of up to 25 years.
By selling the receivables, 8990 will be issued P2.13-billion worth of certificates by CBC Assets One, which the company may sell at face value. The certificates will consist of two tranches, namely: the P1.59-billion Tranche A and the P531.3-million Tranche B.
The SEC said these certificates will not need registration because they will be issued to less than 20 persons.
8990 has been selling its receivables in recent years to generate funds without having to incur new debt. The company’s net debt-to-equity ratio stood at 0.65x as of end-June, down from 0.91x a year ago and below its maximum of 1.5x.
Proceeds from selling receivables are used to support the company’s pipeline of projects. It said in September it has allocated P5 billion to P6 billion for capital expenditures this year.
In the first half of 2020, 8990’s profits dropped 47% to P1.48 billion, attributable to operational disruptions because of the coronavirus-related lockdown. Its revenues fell 30% to P4.91 billion.
Shares in 8990 at the stock exchange slid eight centavos or 1.18% to close at P6.70 each on Thursday. — Denise A. Valdez
