DBP wrote off P1.6B in loans to Lopez group
The Senate is currently investigating behest loans granted by the Development Bank of the Philippines (DBP), and so far the loans to former Trade Minister Roberto Ongpin are at the center of the sights of the investigators. I have been watching the hearings, waiting for the disclosure of the DBP loans granted—and written off—to the Lopez family. But every time the questioning heads in that direction, a senator related to the Lopezes steers the discussion in another direction.
Why the Lopez family? Because the loans granted, and written off by the DBP, to various corporations belonging to the Lopez group amount to more than P1.6 billion! In short, the government lost P1.6 billion to the group. Yet corporations formerly belonging to the group, particularly Meralco, have been reporting billions of pesos in profits.
Here is a list of these written-off loans as reflected in DBP documents:
Maynilad Water—P710.86 million
Central CATV Inc.—P207.10 million
Benpres Holdings—P157. 95 million
All these corporations belong to, or used to belong to the Lopez group. Benpres Holdings, for example, is still operating, but the DBP has already written off loans given to it.
It does not mean, however, that only the Lopez group has non-performing loans (NPLs) written off by the DBP. Other big companies have also gotten away by not paying their loans to the DBP. I will reveal their names in future columns when the documentation is complete.
How did all these come about?
In December 2002, the Special Purpose Vehicle (SPV) Law was passed to assist banks in unloading their portfolio of non-performing assets (NPAs)—NPLs and Real and Other Properties Acquired (ROPAs)—with greater flexibility at a faster pace.
The SPV Law provided fiscal incentives from the transfer of banks’ NPAs to SPVs. Some of the banks which immediately took advantage of the SPVs were: Bank of the Philippine Islands (BPI)—P8.6 billion; Rizal Commercial Banking Corp. (RCBC)—P3.9 billion. DBP did not unload its NPAs to SPVs until late 2006 when it offered to sell its NPAs with a total value of P9.56 billion.
Of the total bulk sale of P9.56 billion (involving 634 NPLs and 2,019 ROPAs), the following four major accounts (with an aggregate book value of P1.67 billion) were companies that were part of the Lopez group. These four major entities accounted for 17.5 percent of the total NPLs sold. The write-off suffered by the DBP on the Lopez group alone was P1.6 billion.
1. Maynilad Water—Facility approved and granted in 2000 and started to default in 2003. It filed with the Regional Trial Court of Quezon City a petition for rehabilitation with suspension of payments on Nov. 13, 2003 and thereafter stopped paying interest. Capital deficit was P5.2 billion. File shows that Benpres Holdings owns 59.1 percent of Maynilad; Ondeo Services Inc., 20 percent; Lyonnaise Asia Water Ltd., 20 percent. Original credit accommodation was a one-year bridge finance for P1 billion in September 2001.
Written-off amount: P710.86 million.
2. Bayan Telecommunications Inc.—Facility was granted on Dec. 11, 1995 and became past due on Sept. 30, 2001. The outstanding balance then was $11.2 million.
The account was then under litigation. The rehabilitation plan under the petition for rehabilitation was approved in 2004 and was for Tranche A and payable over a 10-year period with interest at 3 percent.
Written-off amount: P591.81 million.
3. Central CATV Inc.—The loan was approved in 1997 and became past due in 2001.
The account was restructured in June 2004 for a seven-year tenor, inclusive of a two-year grace period on principal repayment. The borrower was in default of its obligations to maintain the required service cover ratio.
The borrower sent feelers for a second restructuring plan.
Written-off amount: P207.10 million.
4. Benpres Holdings—The loan was approved in 1996 and went past due in 2002. Benpres stopped paying amortizations in May 2002 and negotiations with creditors worsened in 2003 as Maynilad deteriorated.
Benpres paper was being traded in the secondary market at a major discount, which made it difficult for the company to bring all creditors under one restructuring agreement.
Written-off amount: P157.95 million.
In a report to the DBP Board of Directors on Oct. 11, 2010, chief operating officer Edgardo F. Garcia said that write-offs from 2004 to 2009 amounted to P5.391 billion.
“Of this amount, P4.850 billion, or 90 percent, is due to the disposal of ROPAs and NPLs through an SPV in 2006 to avail of tax and other benefits of the SPV Law,” reported Garcia.
“The bulk sale of the ROPAs and NPLs was not fully consummated because of the closure of Lehman Bros. Some of the assets were returned to the bank, and P750 million of losses was reversed and booked as part of income in 2008.
“With Lehman Bros. declaring bankruptcy in 2008, the bank also decided to quickly dispose of the Lehman-issued CLNs worth $80 million, and registered a trading loss of P3.069 billion. The loss was charged to operations in 2008. The balance of $10 million of the Lehman-issued CLNs was sold in March 2010 with a net profit of P58.15 million. Including the interest income of P451.97 million earned on Lehman’s CLNs, net losses on the Lehman investment is P2.594 billion.”
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