National Home Mortgage Finance Corporation (NHMFC) has closed its fifth securitization exercise called “BALAI Shelter Compliance ABS” involving total issuance worth around P715.152 million.
Securitized is a portion of the socialized housing loan portfolio NHMFC acquired from the Home Development Mutual Fund (HDMF) and the issuance consisting of one tranche of Senior Notes and one tranche of Subordinated Notes.
The Class A Senior Notes are worth P170.0 million, and shall feature a principal-only bullet payment in five years. No interest will be paid in relation to the Senior Notes.
The Class B Subordinated Notes are worth around P545.15 million, and will be paid after all Senior Notes have been settled. It will likewise not be paid any interest.
The Senior Notes were exclusively sold to real estate developers and served as alternative compliance in relation to the requirements of the Balanced Housing Development Program.
The program requires developers to engage in one of the following: directly develop socialized housing, participate in a joint venture for socialized housing or take part in the community mortgage program of the government.
Philippine Rating Services Corporation (PhilRatings) upgraded the Conditional Issue Credit Rating of PRS Aa minus for the Class A Senior Notes to a Final Issue Credit Rating of PRS Aa.
On the other hand, the Conditional Issue Credit Rating of PRS Baa for the Class B Subordinated Notes was maintained and affirmed into a Final Rating.
The Conditional Ratings were affirmed into Final Ratings upon closure of the transaction and the submission of final and signed transaction documents and other requirements.
It was noted, however, that though the proposed total issue amount did not change, the allocation for the Senior and Subordinated Notes and the Cash Collateral Account were modified.
The rest of the terms in the draft documents were reflected in the final signed documents. The Final Ratings assigned have considered these changes.
Obligations rated PRS Aa are of high quality and are subject to very low credit risk. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
On the other hand, an obligation rated PRS Baa exhibits adequate protection parameters. Adverse economic conditions and changing circumstances, however, are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. PRS Baa-rated issues may possess certain speculative characteristics.
A Stable Outlook was likewise assigned to the Final Ratings—indicating that the rating is likely to be maintained or to remain unchanged in the next 12 months.
The Final Credit Ratings and Outlook took into consideration the Asset Pool collection performance, economic conditions, the senior and subordinated notes structure, prepayment and interest rate risks, and transaction participants.
This is already the fifth securitization transaction entered into by NHMFC with the first four backing Asset Pools coming from the same universe of assets. The latest Asset Pool, however, was acquired from the socialized housing loan portfolio of HDMF.
The Asset Pool for the BALAI Shelter Compliance ABS was composed mainly of socialized housing loans.
PhilRatings positively noted that none of the accounts are restructured. This is in comparison to previous transactions which had a substantial number of restructured accounts.
Furthermore, the originator of the Asset Pool, HDMF, has a solid credit profile which is supported by the agency’s strong social mandate, healthy cash inflows, above-satisfactory asset quality, and sound capitalization.
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The article was originally published in Manila Bulletin and written by James A. Loyola.
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