Pag-IBIG Bonds - Pro-Bank? Anti-Small Investor?

Hey, why isn't there any indication that the Pag-IBIG bonds will be issued to small investors?  Tsk tsk

In March 2009, the bicameral conference committee amended the Pag-IBIG Fund Charter which includes a key provision for Pag-IBIG to invest no less than 70% of its investible funds to housing.  According to principal sponsor Sen. Miguel Zubiri, “The new Pag-IBIG Fund Law provides for an integrated nationwide mutual provident savings system primarily for shelter finance.” I'm not sure what that means.  I think in essence that means improving real estate financing to poor people.  Economists?

Investing in the bonds will be a proxy for banks lending to the agricultural sector and socialized housing?  Unless I'm mistaken, isn't Pag-IBIG effectively acting as guarantor then?  All the losses will go to Pag-IBIG, none to the banks.  Hmmm...I wonder who wrote that provision.

Lastly, check out the companies in bold.  They'll be issuing corporate bonds this year.  In my eyes, these are the sexiest investments.  ;-)

Pag-IBIG’s P12-billion offer may be 2010’s first major bond sale


Written by Erik de la Cruz / Reporter
Monday, 04 January 2010 19:58
PREPARATIONS are underway for what may be the first major corporate bond offer this year—the P12-billion issue of state-administered Home Development Mutual Fund, also known as Pag-IBIG Fund.

Pag-IBIG will sell bonds with a five-year maturity, with the country’s two state lenders—Development Bank of the Philippines and Land Bank of the Philippines—and First Metro Investment Corp., the investment banking arm of the Metrobank Group, arranging the transaction.

An auction will be undertaken by Bureau of Treasury for pricing the bonds, which may be offered to investors “in the last week of January or early February,” according to Emma Linda Faria, Pag-IBIG deputy chief executive officer.

In a phone interview, she said P5 billion of the proceeds will be used for lending and P7 billion will be used to pay off the Fund’s obligations maturing in May.

Faria said the Department of Finance (DOF) has endorsed the bond issue for approval by the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board.

“We were told that our proposed bond issue has been calendared for Monetary Board approval next week,” she said.

The bond offer was originally scheduled for launching in October last year but was delayed as the Fund had sought to change features of the deal, which required it to go back to the DOF and BSP to seek approval.

Pag-IBIG had decided to drop the initial plan to offer the bonds in two tranches and instead raise the whole amount in a single transaction. The original plan included a debt-swap offer to its creditors.

Faria said Pag-IBIG was seeking to make the bonds more attractive to investors, particularly banks.

Under the proposal, investing in Pag-IBIG bonds will be an alternative mode of compliance with laws requiring banks to allocate a portion of their loan portfolio for the agriculture and agrarian reform sectors and socialized housing.

Members and nonmembers of the Fund, Filipinos and foreign nationals, corporations, developers and insurance companies may also invest in the bonds.

A number of local companies are set to raise fresh capital through the domestic debt market this year, according to investment bankers. Prospective issuers include BDO Leasing and Finance Corp., Philippine Savings Bank, Rizal Commercial Banking Corp, Planters Development Bank and Filinvest Land Inc.

Last year local companies raised around P300 billion through debt sales in the domestic market, a record figure and twice the size of the previous year’s volume, as they took advantage of the prevailing low-interest rates and the abundantly liquid market.

Pag-IBIG is also seeking to augment its loanable funds this year through other options.

Vice President Noli de Castro, chairman of Pag-IBIG, last month said for the first 10 months of 2009 the Fund had assisted over 1.5 million members by extending P29 billion in “multipurpose” loans.

As of December 7, he said the Fund had also approved P11.67 billion in calamity loans servicing almost 700,000 members, up by a hefty 174 percent over the previous year’s figure of P4.26 billion—making the Fund the biggest calamity loan provider in the country.

The housing provident fund had a budget of P84.5 billion for lending in 2009, 20-percent higher than the previous year’s total of P71 billion. Its housing loan portfolio reached P156 billion as of end-March, representing about two-thirds of its total assets of P233 billion.

De Castro said the Fund had released nearly P37 billion in housing loans to more than 61,000 members as of early December.

The figure for 2009 might reach as high as P44.17 billion benefiting over 73,000 borrowers, and he said this would be the highest total loan amount and the biggest number of borrowers for a single year in the Fund’s entire history.

De Castro, however, said the Fund was expected to face challenges in the implementation of its new charter under Republic Act 9679 or the Home Development Mutual Fund Law of 2009.

Beginning this year, he said the Fund is to implement the universal coverage, with all workers earning P1,000 and above now covered by the new law.

But the “major” challenge, he said, is the increase in membership contribution rates, “which needs to be done to further improve the delivery of services to our members.”

Still, de Castro believes “Pag-IBIG is now in a better position to meet the growing demand for affordable housing.”