8990 to Sell Php10 Billion in Receivables, Eyes Php2.5 Billion Securitization in 2020
8990 Holdings listed on the Philippine Stock Exchange under the symbol “HOUSE” signed a purchase agreement with Fillmore Resources and Holdings Inc for the sale of Php 10 Billion Contract-to-sell (CTS) Receivables . The transaction is financed by the Philippine National Bank, one of the country’s largest private universal banks.
This brings the Company’s total receivables sold to Php 25 Billion since it began accelerating the sale of receivables to underline its aim to fund its aggressive growth plans through internally generated cash and lower its reliance on debt.
The Company will spend Php4 Billion on its various projects nationwide in 2019. Next year the plan is to double its capital expenditure to support its goal of hitting Php20 Billion in 2020 as its largest project, Urban Deca Homes Ortigas, starts to contribute to 8990’s topline.
In July 2019, 8990 Holdings launched its largest Metro Manila project, Urban Deca Homes Ortigas along Ortigas Avenue Extension. Once completed, there will be a total of 19,046 units. After two months from the launch, the Company reported sales reservations equivalent to Php1.5 Billion.
8990’s receivables portfolio as of September 2019 was at Php20.9 Billion. This is expected to decline further following the sale of the Php5 Billion CTS receivables and upon the completion of the company’s Php2.5 Billion securitization deal by the end of 2019.
Once launched, 8990’s securitization deal will open the doors to sustainable housing finance which will allow developers to focus on the business of building homes. The Company’s securitization initiative was spearheaded by the late 8990 President & CEO Willie J. Uy. This will be the first private sector led securitization deal in the Philippines.
For the past 16 years, 8990 Holdings Inc’s aim has been helping the country bridge the everwidening housing gap. The company has branches in ten high growth areas across the country with thirteen ongoing projects nationwide priced below Php2.0 million. The minimal upfront payment and manageable monthly amortization payments is especially attractive to the country’s growing middle class.
Securitization will allow 8990 to access funding through the conversion of cash flows from its Contract-to-sell (CTS) receivables into asset backed securities that would provide investors high yields. The securitization of receivables begins with the pooling of Contract-to-sell (CTS) receivables. It is then seasoned for two years before they are converted to interest-bearing securities The Php2.5 Billion securitization is set to be rolled out during the first quarter of 2020. This marks the beginning of a series of securitization deals which will help the Company become less reliant on debt.
The Company already received the approval of the Housing Guarantee Corporation (HGC), making this issuance risk free. 8990 is waiting for its chosen rating agency to assign an investment rating to the underlying securities after it conducts extensive appraisal of the pool of collaterals and stress tests on these assets. This would help investors be more informed once it is sold to the retail market.
“We are confident that we will receive a favorable rating from the rating agency, 8990 has an extensive loan underwriting process that makes sure its buyer risk profile is acceptable to investors”, said Acting President and CEO Alexander Ace Sotto.