Gov’t move to privatize UCPB ‘credit positive’
THE PRIVATIZATION of United Coconut Planters Bank (UCPB) — a move long delayed due to a temporary restraining order (TRO) — is seen as credit positive for the lender once it pushes through, Moody’s Investors Service said.
“A successful privatization of UCPB will help the bank raise new equity capital to meet Basel III capital requirements, a credit positive,” Moody’s said in the Sept. 28 issue of its Moody’s Credit Outlook.
“And, if a larger bank acquires UCPB, we expect that UCPB’s credit quality would benefit from the support of its new majority shareholder,” it added.
This comes after Finance Secretary Carlos G. Dominguez III said last week that the government will push through with its plan to dispose its 73.9% stake in the bank, following the Supreme Court’s decision to lift the 2015 stop order on the planned sale.
“Mr. Dominguez’s statement confirms the government’s commitment to UCPB’s privatization, which received strong market interest before the June 2015 restraining order halted the process.”
“Although no details have been released by either the government or the bank, we expect the terms of the recapitalization plan by firstquarter 2018, shortly after the government and the bank restart the planning work that was done during the last privatization attempt,” the debt watcher said.
The government’s share is worth at least P1.1 billion, comprised of 1,106,408,800 in common shares at a minimum price of P1 each. The winning bidder is required to infuse at least P15 billion in fresh capital.
The credit rater said the buyers of the government’s share will likely take UCPB “as a strategic addition to its domestic operations.”
“Therefore, we expect that the new shareholder will support UCPB, a credit positive for UCPB’s depositors and creditors,” it said.
The Supreme Court, in an Aug. 8 decision, lifted the June 2015 TRO it issued on Executive Orders 179 and 180 signed by former president Benigno S. C. Aquino III, which provides the administrative guidelines for the privatization of P7.5-billion assets acquired using coco levy funds that were collected from farmers during the time of late dictator Ferdinand E. Marcos.
Since 2008, the government has been handing funds to UCPB for its financial rehabilitation program. However, this will expire in December 2018, and Mr. Dominguez has said that the government is not inclined to extend the said program.
UCPB has assets worth P281.5 billion as of the first quarter.