Philippine government agency National Home Mortgage Finance Corp. (NHMFC) and Standard Chartered Bank priced NHMFCs first securitization issue.
The 2.1 Billion BahayBonds are the first RMBS to be issued in the Philippines by a government agency. The senior notes, which carry a fixed rate coupon and have an average life of five years, were priced at 8.4437%.
Standard Chartered Bank served as the deal's arranger and underwriter. Landbank and Rizal Commercial Banking Corp. (RCBC) are the two co-underwriters on the offering.
The transaction was done with the guidance of the Housing and Urban Development Coordinating Council (HUDCC) under the leadership of the Vice-President of the Philippines and HUDCC Chairman Noli de Castro. It is the first step towards NHMFCs mandate to operate as the secondary mortgage institution (SMI) of the Philippines. BahayBonds will be the first in a series of such deals that involve NHMFCs housing loan portfolios.
"This is truly a milestone for the housing market of our country and a remarkable feat by NHMFC. We have been waiting for this moment for some time," de Castro, who chairs the NHMFC board, said. "I am very happy to see all the hard work by the NHMFC management and our shelter agencies, HUDCC and all the parties involved has come out with flying colors. Most importantly, NHMFC is a pillar of our overall commitment to the people of this country that everyone shall have an affordable home to live. That makes this transaction all the more significant."
The transaction is based on a P2.1b pool of residential mortgage loans. These are the best quality loans in NHMFCs UHLP portfolio. BahayBonds, which are tax exempt, is made up of two classes of notes. The senior notes, rated 'AA' by Philratings are being offered to institutional investors. The sub notes, rated 'BBB+' by Philratings, will be retained by NHMFC. Home Guaranty Corp. is the ultimate guarantor of the repayment of the loans.
The Secretary of the Department of Finance Margarito Teves noted, "We are delighted to see NHMFC taking the first and firm step towards fulfilling its mandate. With its maiden securitisation transaction, NHMFC has now opened the doors for access to our capital markets and is now on course towards a state of funding self-sufficiency. The comprehensive vote of confidence by the public and private sector investors in this transaction is a sign of the strength of our financial system. It is also very encouraging to see the addition of a new long-term asset class to our capital markets."
Underlining the importance of the transaction to the Philippines, Standard Chartered Banks global head of debt capital markets Deepak Kohli said, Standard Chartered is proud to be associated in structuring and underwriting the first RMBS transaction in the Philippines by a government agency. NHMFC has taken a lead in opening the RMBS market here with a deal structure with best-in-class terms, per global standards. The government, regulators, insurance providers and investors have invested time and effort in creating a sustainable platform for securitisation transactions. We hope this deal will lead to a more vibrant mortgage market for home owners and spur the development of Philippine real estate sector.
Kohli also urged the investor community and the regulators to support RMBS deals to develop the local debt capital market further.
The issuance met with very good investor demand and is over-subscribed by two times. Although current market conditions are challenging, quality and well structured transactions such as this one are still possible, " Warren Lee, managing director in ABS said. "Being the first securitization ever in Philippines, investors were much more rigorous in their analysis. However, at the end of the day, market reception was very strong, with the deal achieving two times over subscription. We are very pleased to have played a part in NHFMCs and governments initiatives to establish a more efficient housing market and capital markets.
The transaction will be closed on March 25.