MANILA, Philippines – BPI Family Savings Bank plans to securitize P5 billion worth of car-buyer loans to broaden its financing channels and support the growing demand from the automotive market.
The planned transaction will mark the Philippines’ first auto loan securitization.
Under the plan, BPI Family will be selling a portfolio of auto loans to a newly-created bankruptcy remote Special Purpose Trust (SPT).
Ownership of the portfolio will be transferred to the books of the issuer via a true sale. BPI Family, however, will remain the servicer of the said portfolio.
To fund the purchase of the acquisition of the portfolio, the SPT will issue senior and junior bonds which will be secured by the underlying auto loans in the portfolio.
By securitizing its auto loans, BPI Family will take the loans off its balance sheets and free up funds to continue lending.
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The planned issuance was assigned a conditional issue credit rating of PRS Aaa by the Philippine Rating Services Corp.
Obligations rated PRS Aaa are defined as having “the highest quality with minimal credit risk.” This means the obligor’s capacity to meet its financial commitment on the obligation is very strong.
Based on latest data released by the automotive industry, a total of 129,687 vehicles were sold from January to July this year, up 26 percent or from a year earlier.
July posted the highest vehicle sales in a single month to date, in which 20,730 units or 32 percent more were sold year on year.
Filipinos’ appetite for new automotive vehicles has continued unabated, boosting the significant rise in sales in the first seven months of the year on the back of cheap finance and heavy discounting.
The transaction involves the issuance of Class A1 and A2 senior bonds and B junior bonds.
Class A1 bonds have a maturity of 12 months while class A2 has an expected maturity of 36 months.
The junior bonds, on the other hand, will carry a maturity of 48 months.
In assigning the rating, PhilRatings took into consideration BPI Family’s well-managed portfolio of auto loans, with a better payment and collection performance in the past five years compared to the thrift banking system average.
PhilRatings also noted that the auto loans to be included in the asset pool have been selected based on stringent criteria, ensuring that the loans are the better performing accounts in BPI Family’s total auto loan portfolio.
Also considered was BPI Family’s historical performance, behavior and payment structure of the underlying asset pool, along with the payment structure of the securitization serve to minimize prepayment and interest-related risk for the bondholders.
The auto loans and senior bonds also have fixed interest rates. This ensures the relative stability of cash flows and spreads of the transaction.