Loan rules for SPEs to widen credit access

UNIONBANK of the Philippines welcomed the move of the Bangko Sentral ng Pilipinas (BSP) to ease rules on the lending ceiling imposed on banks to accommodate financing for big-ticket infrastructure projects.
During a roundtable discussion, UnionBank President and Chief Executive Officer Edwin R. Bautista said the central bank’s move is a good thing as this will help firms involved in constructing big-ticket projects.
The BSP allowed firms implementing major infrastructure projects to have a separate single borrower’s limit (SBL) as they secure funding from banks and quasi-banks.
The SBL is intended to limit the credit exposure to a single client to a maximum of 25% of a bank’s net worth to minimize risks for the lender in the case of default, as relying too heavily on one borrower could damage the bank’s performance and bottom line.
Mr. Bautista explained that the easing of SBL rules will be beneficial for conglomerates involved in the construction of projects part of the government’s “Build Build Build” initiative, as some of them have already borrowed funds to grow their businesses.
“Many of the entities who are bidding for those big projects are the conglomerates and the same [firms] who have also borrowed to fund their own expansions. If you didn’t give them relief, some of them will hit their SBLs,” Mr. Bautista said in a mix of Filipino and English.
The new rules allow project contractors — which the BSP called special purpose entities (SPEs) — to have a separate 25% exposure cap from lenders. This effectively gives them a bigger loan line to tap, as it would be treated separately from credit secured by their parent firms.
SPEs are usually composed of several conglomerates forming a consortium as they bag big-ticket construction contracts from the government.
Aboitiz Equity Ventures, Inc., UnionBank’s parent company, is one of the conglomerates which are part of the “super-consortium” proposing to rehabilitate the Ninoy Aquino International Airport. Other companies which are part of the group include Ayala Corp., Alliance Global Group, Inc., Asia Emerging Dragon, Filinvest Development Corp., JG Summit Holdings Inc. and Metro Pacific Investments Corp.
The country’s monetary authority said the move is “in support of the government’s Build, Build, Build initiative,” referring to the plan of the government to spend as much as P8 trillion from 2016 to 2022 on high-impact infrastructure projects nationwide.
“The country needs the infrastructure… roads, ports and bridges. That’s a good thing. That will also spread out the growth outside Manila,” Mr. Bautista added.
UnionBank recorded a P2.9-billion net profit in the first quarter of the year, 31.8% higher than the P2.2 billion it booked in the same period in 2017. The Aboitiz-led lender said it “sustain[ed] double-digit growth in terms of customer businesses.”
The Aboitiz-led bank will raise P10 billion in additional capital through a stock rights offer as approved by its board of directors to boost its buffers and fund continued growth.
UnionBank shares closed at P91.25 each on Monday, gaining P1.05 or 1.16% from Friday’s finish. — K.A.N. Vidal