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Disasters, failure of governance are top risks to business

NATURAL CATASTROPHES and failure of national governance dominate the concerns for business executives in the Philippines this year, according to the World Economic Forum’s (WEF) “Regional Risks for Doing Business 2020” report.

In the survey conducted between January to July, business leaders were presented with a list of 30 risk issues and were asked to pick five they believe to be of most concern for doing business in their respective countries within the next 10 years.

In the Philippines, natural catastrophes topped the list with 54.5% of the country’s respondents including it in their list of five highest perceived risks in doing business —  the second-highest response rate for this issue out of 130 countries, only behind Japan’s 75.3%. This is also way above the global and East Asia and Pacific (EAP) averages of 15.8% and 39.4%, respectively.

Top risks of greatest concern for doing business

The Philippines is prone to natural disasters such as earthquakes, volcanic eruptions, and typhoons.

Other top perceived risk issues in the Philippines include failure of national governance (51.1%, 10th overall); spread of infectious diseases (51.1%, 18th); failure of critical infrastructure (40.9%, sixth); and extreme weather events (35.2%, eighth).

Key issues among Filipino business leaders differed from those at the global level, which had “unemployment or underemployment” as the top concern with 34.5% compared with the country’s 19.3% (100th overall).

Besides jobs, top global concerns include the spread of infectious diseases (32%), fiscal crises (26.5%), cyber attacks (26.1%), and profound social instability (26.1%).

For the EAP region, concerns on the spread of infectious diseases ranked highest at 47.9%, followed by asset bubbles (40.6%), natural catastrophes (39.4%), interstate conflicts (35.2%), and cyber attacks (29.6%).

Sought for comments, University of the Asia and the Pacific Economist Victor A. Abola said that the risks raised by Filipino business leaders are valid, adding that the public and private sectors should work together to address those risks.

“We need to spend more to minimize negative effects of calamities (but more is being done since Yolanda and now COVID-19), but failure of national governance is clearly a strong message,” Mr. Abola told BusinessWorld in an e-mail.

“However, more than NG (National Government), I think the problem is in the LGUs (local government units) whose officials do not have the national interest at heart,” he said.

The survey, which had about 12,000 respondents, was conducted by the WEF in partnership with US-based professional services firm Marsh & McLennan, Swiss-based Zurich Insurance Group, and South Korean conglomerate SK Group. — Ana Olivia A. Tirona

Top risks of greatest concern for doing business

NATURAL CATASTROPHES and failure of national governance dominate the concerns for business executives in the Philippines this year, according to the World Economic Forum’s (WEF) “Regional Risks for Doing Business 2020” report. Read the full story.

Top risks of greatest concern for doing business

Privatization of government mining assets ‘long overdue’

By Revin Mikhael D. Ochave, Reporter

THE GOVERNMENT’S plan to privatize some of its mining assets is long overdue, and will provide a huge boost to the mining industry amid the pandemic, the Chamber of Mines of the Philippines (COMP) said.

“It’s about time that the government should look deeper into reviving the mining industry, especially in the midst of the COVID-19 pandemic. The idea of selling or privatizing the government’s legacy mining assets should have been done a long time ago,” COMP Executive Director Ronald S. Recidoro told BusinessWorld via mobile phone message.

While productivity of these old mines will not be as good as new ones, Mr. Recidoro said it would “address the environmental issues posed by the abandoned mines such as erosion, while companies will be able to unlock the value of these mines.”

He said the government-owned mining assets still have value that can be tapped once operations resume, unlike new mining projects that would have to undergo a long application process.

“If you want to have immediate returns or revenue, you may want to consider reviving the old mining projects. It will be less costly to rehabilitate old mining sites than to approve new mining projects because the winning bidders of the existing state-owned assets will not have to conduct too much exploration work,” Mr. Recidoro said.

However, Mr. Recidoro said the government should address other issues before the mining industry can be fully revived, such as the current moratorium on new mining projects under Executive Order 79, the ban on open-pit mining, and the ongoing suspension of mines by the late Environment Secretary Regina Paz L. Lopez.

Meanwhile, Mines and Geosciences Bureau (MGB) Director Wilfredo G. Moncano said the privatization of state mining assets will go through a process but will take less time than securing a new permit.

“There is still a process after a winning bid is awarded but it is not as tedious as a new applicant,” Mr. Moncano said in a mobile phone message.

Mr. Moncano said the country’s mining sector’s full potential has not been maximized, but would need the support of both the executive and legislative department.

Currently, House Bill No. 6135 that provides a fiscal regime for the mining industry has hurdled the House Committee on Ways and Means while the counterpart measure Senate Bill No. 313 is still awaiting committee approval.

Mr. Moncano said the MGB’s Land Geological Survey Division has estimated that the value of the country’s metallic and non-metallic mineral resources, including sand and gravel, are worth $7 trillion.

The current contribution of the mining industry to the country’s gross domestic product (GDP) is less than 1%. He said this contribution can be bigger once mining policies are improved.

“There had been mining operations in the past that left their mining sites unrestored and unrehabilitated when major problems occurred like tailings spill, global recession, or major drop in mineral commodity prices,” Mr. Moncano said.

“These idle mining assets have values in several billions that need serious investors that are willing to comply also with our country’s law,” he added.

Finance Secretary Carlos G. Dominguez III on Wednesday said the government wants to revive the mining industry to generate revenues and create jobs.

He said he has asked the Privatization and Management Office (PMO) to proceed with the plan to privatize Nonoc Mining and Industrial Corp. and Basay Mining Corp., among others, after reviewing all of the government’s existing mining assets, to look for additional revenue sources.

Cebu Pacific eyes $500M for recovery

FUNDRAISING aims to help carrier ‘navigate current environment and thrive in the ‘new normal’ — BW FILE PHOTO

By Arjay L. Balinbin, Senior Reporter

CEBU AIR, Inc., the listed operator of budget carrier Cebu Pacific, is seeking to raise about $500 million in fresh capital to “strengthen” its balance sheet, as the industry fights for survival amid the ongoing coronavirus pandemic.

In a disclosure to the stock exchange on Thursday, Cebu Air said it “intends to undergo a fundraising plan” that will enable it to “navigate the current environment and thrive in the new normal.”

It added it aims to raise “aggregate proceeds of approximately $500 million.”

The fundraising plan involves a “convertible preferred share rights issue for an aggregate proceeds of about $250 million” and “a private placement of convertible bonds with aggregate subscription price of up to $250 million.”

Aside from boosting its balance sheet, Cebu Air plans to use part of the proceeds for general corporate purposes.

In a separate disclosure, the Cebu Pacific operator noted an urgent need to fast-track its transformation because of the “exceptional change in market conditions and industry dynamics.”

The business transformation involves “right-sizing of the network and fleet to meet new demand, and improvement of operations efficiency through process and policy enhancements and digitalization, among others,” Cebu Air said.

Cebu Air has scheduled a special stockholders’ meeting on Nov. 20, where it will be seeking the shareholders’ approval to increase the company’s authorized capital stock from P1.3 billion to P1.7 billion and “create a new class of convertible preferred shares with a par value of P1.00 per share.”

It said the issue price of the convertible preferred shares rights issue and the convertible bonds private placement “will be decided based on various factors, including the prevailing market price at such relevant time, and the broader equity capital market conditions.”

“The conversion price of the convertible preferred shares and the convertible bonds is expected to be the same and to be set within P38 to P45 range, representing 2% to 21% conversion premium over Cebu Air’s 30-day volume weighted average price from August 26, 2020 to October 7, 2020,” the company added.

Cebu Air previously reported a net loss of P7.96 billion for the second quarter, reversing a profit of P3.79 billion in the same period last year.

The government-imposed travel restrictions during the period resulted in a nearly 93% decline in the company’s gross revenues to P1.42 billion from P23.53 billion in the year-earlier period.

Shares in Cebu Air on Thursday closed 1.21% lower at P36.65 apiece.

Pepsi shares may finish tender offer outside PSE facilities

By Denise A. Valdez, Senior Reporter

PEPSI-COLA Products Philippines, Inc. has suspended the tender offer of its shares by Lotte Chilsung Beverage Co. Ltd. due to a possible change in the transfer procedure.

In a letter to the exchange publicly disclosed on Thursday, Lotte Chilsung said it suspended its ongoing tender offer of Pepsi-Cola Philippines for two days, and will be relaunched on Monday, Oct. 12.

This decision was due to an advice by the Philippine Stock Exchange (PSE) that Lotte Chilsung will need to conduct the tender offer through facilities outside the bourse.

First Metro Securities Brokerage Corp., the tender offer agent of Lotte Chilsung, was supposedly verbally told by the PSE that the company’s on-exchange transaction cannot be approved because the shares being tendered are below the minimum public ownership requirement and are currently suspended from trading.

“As a result thereof, the tendered shares cannot be crossed as an on-exchange transaction, and the transfer of such shares will be conducted outside the facilities of the PSE,” it said.

“[Lotte Chilsung] deems it prudent to suspend the conduct of the delisting tender offer pending settlement and finalization of the mechanics of the off-exchange transaction,” it added.

Minority shareholders from whom the shares are being bought may withdraw their shares through First Metro Securities.

Lotte Chilsung is currently buying 77.86 million common shares in Pepsi-Cola Philippines through a tender offer. This is after Lotte Chilsung bought 1.13 billion shares in the listed company earlier this year, which brought the company’s public ownership below the PSE’s minimum requirement.

Falling below the minimum public ownership requirement is a ground for delisting. Pepsi-Cola Philippines decided last month to delist its shares from the bourse, as it is unable to comply with the minimum public float in the prevailing market condition, it said.

Shares in Pepsi-Cola Philippines stopped trading on June 17, when it closed at P1.70 apiece.

Honda positive on hatchback model, but aligns with industry forecast

HONDA Cars Philippines, Inc. is expecting sales opportunities through its hatchback models while its overall sales decline remains consistent with the local industry.

Similar to other manufacturers, the car company said that it will not be reaching its sales forecasts set at the start of the year.

“Because of the pandemic, we have to reduce [the forecast] to a certain level. Basically, whatever is the forecast of the industry about the sales for this year, we are basically aligned with that,” Honda Philippines Vice-President for Sales Louie Soriano said in an online briefing on Thursday.

Local manufacturers expect a 41.5% sales decline in 2020, compared with the level last year.

However, Honda is seeing some growth opportunities for hatchback models.

“It’s still the City that has the biggest contribution to our sales, and looking at the industry, there is an opportunity for a growth in the hatchback. So, I think our Brio was able to contribute to the growth,” Mr. Soriano said.

“Basically, we were able to increase our market share in that hatchback market,” he added.

Honda sales in eight months to August declined 43.9% to 7,335 units, according to a report from the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and Truck Manufacturers Association (TMA)

Earlier this year, Honda shut down its car production facility in Laguna.

The Department of Trade and Industry had said that it was considering placing safeguard measures on imported cars to protect local assembly. — Jenina P. Ibañez

FPJ’s Ang Probinsyano returns as ABS-CBN partners with Zoe

AFTER months off the air, some ABS-CBN shows including variety show It’s Showtime and the long-running series FPJ’s Ang Probinsyano, are returning to free TV starting Saturday on the rebranded A2Z Channel 11 of Zoe Broadcasting Network, Inc.

Starting Oct. 11, It’s Showtime will be airing live on A2Z and variety show ASAP Natin ‘To will start airing on Oct. 12.

The weekend will also see marathon telecasts of FPJ’s Ang Probinsyano, Ang Sa Iyo ay Akin, and Walang Hanggang Paalam before these shows resume airing with fresh episodes on weeknights starting Monday, Oct. 12.

Other ABS-CBN shows which will be airing on A2Z are talk show Magandang Buhay, game show I Can See Your Voice, and drama anthology MMK, though no specific dates for these have been announced yet.

In the months after Congress denied the renewal of the network’s franchise, ABS-CBN has focused on getting its shows out online via Facebook and YouTube and through its streaming service, iWant. The network has also pushed to export its shows to other countries including South America and Africa.

But with the deal signed with Zoe Broadcasting Network, the embattled network has found a way to return to free TV via block-timing or buying timeslots to air its shows.

Zoe Broadcasting Network is the broadcast media arm of the Jesus is Lord Church, headed by Eddie Villanueva. A2Z was formerly Zoe Channel 11 and with the channel rebranding come new shows from ABS-CBN and programs from Christian Broadcasting Network (CBN Asia) and Knowledge Channel, among others.

A2Z is on Channel 11 (analog) on free TV and SkyCable and other cable and satellite TV providers. — Zsarlene B. Chua

AboitizPower bags First Bay’s supply contract

ABOITIZ POWER Corp. has secured the supply contract of First Bay Power Corp., extending their partnership which spanned for more than a decade ago.

After three months of a competitive selection process, AP Renewables, Inc., the power firm’s renewables arm, was chosen out of four bidders for the distribution utility’s power supply agreement.

The deal is to deliver 10 megawatts of geothermal energy to Bauan town, Batangas, the franchise area of First Bay.

“It is our privilege to take this journey further, as we support the needs of FBPC, and in turn, contribute to the continuing growth of residents and businesses in the province, in ways that are reliable and sustainable,” said AboitizPower Vice President for Commercial Operations Juan Alejandro A. Aboitiz in a statement.

AP Renewables runs two geothermal facilities; one in Bay, Laguna and another in Tiwi, Albay. These were acquired from the National Power Corp. back in 2009.

First Bay replaced Bauan Electric and Light System as the Batangas town’s distribution utility. In 2016, the government granted it with a franchise.

Two years ago, the Department of Energy under Secretary Alfonso G. Cusi enforced a competitive selection process in the procurement of power supply by power utilities from generation firms. The scheme aims to bring down electricity cost.

Shares in AboitizPower fell by 1.15% to close at P25.90 each on Thursday. — Adam J. Ang

Wonder Woman director warns movie-going could become extinct

LOS ANGELES – Patty Jenkins’ new Wonder Woman movie has been delayed three times during the coronavirus pandemic. Now, the director is sounding the alarm that movie-going itself is under real threat.

This as Warner Bros. said late Monday that it is delaying the release of Dune and The Batman movies, another setback for the entertainment industry hit by COVID-19 pandemic lockdowns and social distancing measures that have closed theaters worldwide.

Jenkins is among dozens of top Hollywood directors appealing to the US government to provide a financial lifeline to cinemas. Without it, she warned, the century-old tradition of going to the movies could disappear from American culture.

“If we shut this down, this will not be a reversible process,” she said in an interview from her home in Los Angeles. “We could lose movie theater-going forever.”

While theater attendance has rebounded in some countries following a global shutdown in March, the US market is struggling. The National Association of Theater Owners said 69% of small and mid-sized cinema companies could be forced to file for bankruptcy or shutter permanently.

On Monday, the world’s second-biggest cinema chain, Cineworld, decided to temporarily close its UK and US movie theaters in an attempt to survive a collapse in film-making and cinema-going.

Credit rating agency Fitch promptly downgraded the company. “Our base-case forecasts indicate that, the company’s current liquidity levels may only be sufficient until November to December 2020, assuming no revolving credit facility (RCF) extensions,” Fitch said in a statement.

Ms. Jenkins said widespread closures would lead Hollywood studios to stop investing in films for theaters, and turn to streaming instead.

“It could be the kind of thing that happened to the music industry,” she said, “where you could crumble the entire industry by making it something that can’t be profitable.”

Expensive action movies like Wonder Woman would be much less common on streaming, she said, and audiences would miss out on the experience of watching on a big screen in a large group.

“I don’t think any of us want to live in a world where the only option is to take your kids to watch a movie in your own living room,” she said, “and not have a place to go for a date.”

Some of this year’s major Hollywood films, including Walt Disney Co.’s Mulan, skipped cinemas and went straight to streaming. Ms. Jenkins said that option is not under consideration for her sequel, Wonder Woman 1984. Her 2017 Wonder Woman film took in $822 million at box offices worldwide.

The follow-up starring Gal Gadot as the lasso-wielding warrior is now scheduled for release by AT&T, Inc.’s Warner Bros. on Christmas Day in December. It had originally been set for June.

Ms. Jenkins said she was watching the progress of the pandemic and hoping that Wonder Woman can lead a return to cinemas that gives people a welcome escape from reality.

“I really hope that we are able to be one of the very first ones to come back and bring that into everyone’s life,’ she said.

WARNER BROS. DELAYS DUNE, THE BATMAN
Dune, a sci-fi movie directed by Canadian director Denis Villeneuve, is now scheduled to open in October 2021, instead of December. The release of The Batman, starring Robert Pattinson, has been moved to the spring of 2022 from October next year.

Movie releases have been getting delayed even after restrictions were eased, with people still wary of stepping into cinema halls, and many theaters still not operational.

Earlier, the filming of The Batman was also shut down for two weeks after a member of the production — widely reported to be Pattinson — tested positive for the new coronavirus. Filming resumed in Britain last month and Warner Bros. never confirmed or denied reports about Pattinson’s diagnosis.

Dune has gained a lot of traction for its cast that includes 24-year-old Timothee Chalamet, who was nominated for an Academy Award for his role in the 2017 film Call Me by Your Name. The release of the new James Bond movie No Time to Die from MGM and Comcast Corp.’s Universal Pictures has also been delayed until April 2021.

JURASSIC WORLD SEQUEL PRODUCTION SUSPENDED
Meanwhile, production of Jurassic World: Dominion from Universal Pictures has been suspended for two weeks after a few people on the set tested positive for coronavirus disease 2019 (COVID-19), director Colin Trevorrow said on Wednesday. “All tested negative shortly after, but due to our safety protocols we’re going to pause for two weeks,” Mr. Trevorrow wrote on Twitter.

Filming on the dinosaur adventure movie resumed in England in July under stringent protocols for the cast and crew to contain the spread of the coronavirus. Production had been halted in mid-March because of the pandemic, which shut down movie and television sets around the world.

Mr. Trevorrow did not identify who had tested positive on the movie, whose stars include Chris Pratt and Bryce Dallas Howard. Universal Pictures, part of Comcast Corp, announced Tuesday that the release date for Jurassic World: Dominion was being pushed back one year to June 2022.  — Reuters

Movie piracy is rising with studios skipping theater releases

ALONG with stalling film production, shutting theaters, and throwing release schedules into chaos, the coronavirus pandemic has brought still another woe to Hollywood: a rise in movie piracy.

Studios have tried to salvage some of their big-budget films this year by selling them through streaming services for $20 to $30. But that business model has made it easier for pirates to illegally copy and share new releases, with an estimated loss of millions of potential customers for the production companies.

Unlicensed downloads of Walt Disney Co.’s most-recent picture, Mulan, have outpaced those of other movies since its Sept. 4 US debut on the Disney+ streaming service, according to TorrentFreak, a website that tracks pirating activity on public servers. Compared with The Lion King, which came out last year in theaters, Mulan saw about twice as many downloads in the days and weeks after its release.

When a traditional movie is released in theaters, thieves struggle to obtain high-quality recordings of it, often resorting to bootlegging with a hidden camcorder. With digital releases, pirates use technologies not available to most consumers to make perfect copies quickly.

The high cost of legitimate first-run streaming movies may also be dissuading some people. A licensed version of Mulan costs $30, on top of a $7-a-month subscription to Disney+. Trolls World Tour, from Comcast Corp.’s Universal Pictures, started streaming in April for $20.

Disney and Universal didn’t respond to requests for comment.

Limelight Networks, Inc., which provides digital distribution of entertainment content and applies antipiracy measures, has seen piracy “going up dramatically” in recent months, Chief Executive Officer Robert Lento said.

“We spend more time talking to our customers about it now than ever before,” Mr. Lento said.

ADDING WATERMARKS
The most common technique to limit piracy is by adding watermarks that help trace which customer originally received the movie. When content is found on a pirating website, the watermarks can be used to ban the original purchaser. But that method doesn’t always work, and it hasn’t stopped the yearslong surge in piracy.

Government efforts have also been unsuccessful at preventing viewers from accessing pirated content. Pascal Metral, vice-president of legal affairs at Nagra Kudelski, another digital-distribution company, said studios are most concerned with shutting down the big players who move films for profit. Attempts to go after casual users could alienate more customers than it’s worth, Mr. Metral said.

WHAT BLOOMBERG INTELLIGENCE SAYS
“The seemingly muted performance of Disney’s Mulan in the premium digital-film-distribution window raises questions about the viability of skipping a theatrical release in favor of streaming, further vexing the decision-making for studios delaying blockbusters like Black Widow and No Time to Die. Mulan appears to have fallen short of the 10 million digital buys needed to break even on a $300 million production and marketing budget, based on our scenario analysis,” said media analyst Geetha Ranganathan.

While movies on peer-to-peer networks are free, those files often contain malware. Consequently, an entire industry has been propped up that offers reliable high-quality streaming of copyrighted works for a low monthly fee or advertisements. Streaming videos resolves most of the security risks.

Under scrutiny in Congress is one loophole of copyright law that lets streaming pirates off with only a misdemeanor offense, said Frank Cullen, Jr., vice-president of intellectual-property policy at the US Chamber of Commerce’s Global Innovation Policy Center. Other types of pirating where the content is republished as a file is punishable as a felony.

Closing the loophole has been discussed since at least 2011, although congressional talks are still ongoing, Mr. Cullen said.

‘UP-TO-DATE PENALTIES’
Karyn A. Temple, then-director of the US Copyright Office, last year wrote to the chairman and ranking member of the Senate Judiciary Committee to urge the adoption of “up-to-date criminal penalties that are appropriate to the offenses and the digital world in which we operate.” Ms. Temple is now general counsel of the Motion Picture Association.

Last month, the US Immigration and Customs Enforcement launched an ad campaign in conjunction with several industry trade groups. The focus is on risks to digital security and fraud when accessing pirated content. At a press conference, ICE officials highlighted the economic risks, noting that piracy costs the economy more than $29 billion each year.

“Clearly the rise of digital streaming presents new challenges when it comes to copyright protection for both the content creative industry and of course law enforcement,” said Derek Benner, executive associate director for Homeland Security Investigations.

Not all pirates go unchecked. In August, the Justice Department charged three men for their involvement in a disc-based piracy ring that distributed nearly every movie released by major production studios. The losses are estimated at tens of millions of dollars. — Bloomberg

BSP hopes to issue digital banking framework this year

THE CENTRAL BANK is looking to release its digital banking policy framework this year to provide guidance to financial institutions targeting to provide such services.

“Digital banks are expected to deliver services appropriate to the needs and capacity of Filipinos particularly families with low disposable income,” Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said on Thursday.

“The BSP is in the final states of the policy formulation process. We hope to issue the policy before the end of the year,” he added.

Under the central bank’s three-year digital payments transformation road map, the BSP will make a distinct classification for digital banks.

By definition, digital banks will have zero or minimal reliance on physical touch points as compared to traditional lenders, Mr. Diokno said.

Despite this, digital banks are still expected to comply with the same standards of corporate governance and risk management required from brick and mortar lenders.

“This will include information technology, cybersecurity, outsourcing, consumer protection and anti-money laundering and countering the financing of terrorism,” Mr. Diokno said.

The BSP chief said “quite a number” of local lenders, quasi-banks, and foreign entities already expressed interest in establishing digital banks in the Philippines.

“Upon release of the subject guidelines, we will start accepting applications for authority to establish digital banks, but the BSP reserves the right to set a limit on the number of digital banks’ entrance considering the number of applications received as well as the developments and overall banking situation,” he said.

Under House Bill 5913 also known as the Virtual Banking Act of 2020, the BSP can grant licenses to operate to no more than five virtual bank applicants every year for five years. The Monetary Board may then increase or decrease this limit afterwards.

Albay Representative Jose Maria Clemente S. Salceda, who is also the Chair of the House Committee on Ways and Means, filed House Bill (HB) 5913. He said the bill is expected to encourage virtual banking in the Philippines to flourish into a P903-billion industry. The bill is still pending in Congress.

Among current digital-only lenders in the Philippines include CIMB Bank Philippines, Inc. and ING Bank N.V.-Manila. Both are known for offering deposit rates of up to 4% annually and some lending propositions in order to encourage more users to join.

The BSP sees digital banks helping boost financial inclusion among Filipinos. 

“Licensing digital banks will bring us closer to our goal of shifting at least 50% of retail payment transactions to digital channels and ensuring 70% of Filipino adults have transactional accounts by year 2023,” Mr. Diokno said.

Only 29% of Filipino adults had formal accounts in financial institutions in 2019, leaving about 51.2 million unbanked, BSP data showed. In 2017 to 2019, about five million Filipinos were able to open an account. — L.W.T. Noble

8990 gets SEC nod to securitize P2.13-B receivables

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

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