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| PHI-NPL |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 26575 |
| Company name | American International Group of Companies |
| Country | Philippines |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Dropped |
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| Date SPI disclosed | November 15, 2007 |
| Projected board date | January 15, 2007 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| The proposed project involves IFC’s investment in a pool of non-performing loans (NPLs) in the Philippines. The pool (Pool) of loans is would be purchased by the sponsor and the IFC from a local bank. The Pool comprises about 387 NPL borrower accounts and related assets. The Pool’s unpaid principal balance (UPB) of approximately PHP 27 billion (about $610 million). |
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| Project sponsor and major shareholders of project company |
| The sponsor, AIG, is a world leader in insurance and financial services, and the leading US international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through one of the most extensive worldwide property-casualty and life insurance networks. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG has a presence in the Philippines through its wholly-owned insurance subsidiary, The Philippines and American Life Insurance Company. |
| Total project cost and amount and nature of IFC's investment |
The total project cost is about $110 million.
AIG, through one or more of its affiliates, would make an equity investment in the Pool of approximately $90 million and IFC an equity investment in the Pool of up to $20 million. |
| Location of project and description of site |
| The Pool's assets are located throughout the Philippines and would be serviced by local and international servicers. |
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| Anticipated development impact of the project |
The developmental impact of well-structured distressed asset transactions is well recognized. Such transactions help improve the stability of the banking system by:
- encouraging transparency in balance sheets as the true value of distressed assets is determined by the market value paid by the buyers of NPLs;
and transferring distressed assets to specialized entities that can efficiently resolve such assets.
In addition, the efficient resolution of NPLs contributes to the development of a much better credit culture, especially in countries where the willingness to repay (as opposed to the ability to repay) has been the cause of serious portfolio problems in the banking systems. In most cases, such problems have had to be resolved at significant fiscal costs. |
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| IFC's expected development contribution |
| The IFC has a critical role to play in countries with underdeveloped markets for distressed asset resolution. The NPL market in the Philippines is at a relatively early stage with only a few notable transactions especially in comparison to the level of distressed assets in the banking system. As such, the IFC is playing a role in this transaction by helping align the interests of the various parties involved. In addition, the IFC’s presence in this transaction will be a source of comfort for the regulators, including the BSP, and is likely to serve as a catalyst for the entry of more private capital into the local NPL market. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review procedure. While NPL/DA transactions facilitate the financial and corporate restructuring of domestic companies, such transactions may pose environmental and/or reputational risks.
IFC will determine the Project’s Applicable Requirements, if any, that would include a combination of: the IFC FI Exclusion List; the applicable National Environmental and Social Laws and Regulations; and the IFC Performance Standards. IFC will also review the capacity of the project servicer to manage environmental and social risks and to establish and maintain a Social & Environmental Management System (SEMS). If necessary, IFC will suggest Supplemental Actions to address any gaps in the SEMS. Based on the review, the project servicer may be required to:
- Develop or upgrade, if necessary, any existing Social & Environmental Management System (SEMS), prior to disbursement to the satisfaction of IFC
- Identify responsible, qualified persons to manage and implement the SEMS
- Commit to implement the SEMS, to ensure that its investments/activities are in compliance with the Applicable Performance Requirements
- Submit a periodic report to IFC as per a format to be provided by IFC
In addition to any other requirements, the project servicer may also be required to review information available in the public domain and avoid investments in sub-projects that have substantial unresolved environmental and social issues. |
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| For inquiries about the project, contact: |
Afsar Farman-Farmaian
AIG Investments
599 Lexington Ave. 25th Floor
New York, NY 10022
afsar.farman-farmaian@aig.com |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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