Biz Buzz: Hanjin’s ‘piso sale’
It’s not a budget airline fare promo but P1 is the nominal value at which all shares of Subic-based Korean-owned shipbuilder Hanjin are selling for. But it’s still nowhere near a bargain, or white knights would have queued up for a deal. The catch is, of course, apart from paying P1, the buyer has to assume the large debt owed by the shipbuilder. The $400 million estimated credit exposure of five Philippine banks is less than half of the debt owed by the group to other creditors.
And even if local banks agree to support a corporate rehabilitation, they have to bring in other institutions—particularly Korea Development Bank—to make it work, said an industry source who had looked at this shipbuilder. Korea Development Bank guaranteed most of the borrowings of Hanjin, and without its participation, any effort to restore viability will be difficult, the source said.
The talk within banking cir- cles is while the Philippine operations of Hanjin are okay, most of the cash had been siphoned off to service debt at the parent level. There’s thus concern that most of the liquid and other portable assets of value may have already been repatriated by this time. Furthermore, many of Hanjin’s offshore lenders had pulled the plug two years ago.
Meanwhile, the publicly listed banks hit by the Hanjin debt default started clarifying their credit exposure only yesterday.
BPI clarified that its exposure was $52 million versus the previous estimate of $60 million.
RCBC said its exposure was $145 million, a bit higher than the earlier estimate of $140 million. The bank said its loan involved four shipbuilding contracts, the completion of which would allow the repayment. “The local banks have a parent guaranty from Hanjin Korea, which secures the exposure to HHIC Phils.,” the bank said.
“The total exposure is only 1 percent of RCBC’s assets of P614 billion and less than 2 percent of the P387 billion of total net loans. The bank’s net NPL (nonperform- ing loan) of 1.2 percent (ratio to total loans) as of September 2018 will increase as a result of this exposure and corresponding provisions will be made based on accounting standards and regulatory guidelines,” the bank said.
RCBC said that with capital of P84 billion as of September 2018, it was “in a strong position to absorb these provisions.” “Even with this default, the bank’s capital adequacy ratio of 17.3 percent as of September 2018 remains very strong, well-above regulatory minimum and can still support medium-term loan growth.”
Metrobank and BDO didn’t cite actual figures but neither did they deny earlier reported exposures of $72 million and $60 million, respectively.
Metrobank said its exposure to Hanjin was “low relative to our total assets of P2.1 trillion,” adding that it had adequate provisions and thus did not see any significant impact to its operations. BDO said its Hanjin exposure represented only 0.15 percent of its total loan portfolio, adding that this was “not considered a material amount.”
Hoping for cheaper airfare
Bohol—specifically the adjacent Panglao Island—has been one of the hottest tourism destinations in the country for some years now.
Yet the island’s white sand beach destinations remain relatively underdeveloped compared to other popular sites like Boracay (perhaps thankfully so for some, but not for those banking on tourism for their livelihood).
Why so? Well, expensive airfare is one of the contributing factors to the beautiful island’s relative underdevelopment. We’re told that during peak travel season, a one-way flight to Bohol via the old Tagbilaran Airport could cost as much as P10,000. Double that and that’s what one would spend for a round-trip flight—more than what it takes to fly from Manila to Caticlan or even to Hong Kong.
This is also a burden on Boholanons who need to fly to and from Manila on nontourism related business. So it’s not just the tourists who are deterred by the expensive travel costs, but the locals as well.
Well, that may soon change with the opening last November of the new Bohol-Panglao International Airport, which—if plans don’t miscarry—will be operated, maintained and eventually expanded by the Aboitiz conglomerate under an unsolicited proposal they submitted last year.
Local stakeholders like Bohol Tourism Office head Josephine
Cabarrus are optimistic that a private sector approach to airport management and operations will improve the local situation given the large number of passengers expected to fly in and out of the island in the coming years.
One airport consultant noted that tourism in Bohol grew at an annual rate of 25.2 percent from 2011 to 2017, and by 30 percent from 2016 to 2017, reaching 1.3 million tourists. Panglao is the most popular tourist destination in Bohol, hosting 704,000 tourists in 2017.
The new airport is 10 times bigger than the old Tagbilaran Airport, and has a 2.5-kilometer runway that can accommodate seven aircraft at one given time and a passenger terminal that can handle two million travelers annually. With sustained growth expected, the new airport will require expansion by 2025.
Aboitiz’ bid to run Bohol’s new airport is an unsolicited proposal, so it will have to clear the board of the National Economic and Development Authority (Neda), which will convene today to review several proposals for infrastructure deals. If it was approved, it would have to undergo a Swiss challenge.
Given that the Bulacan airport proposal of San Miguel Corp. was put through the wringer by Neda just last month, and initially disapproved before it was finally cleared by Malacañang, all eyes were now on the socioeconomic department to see whether Aboitiz would fare any better. Would they? Abangan!