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Prospective Urban Bank buyers start due diligence work

The five prospective buyers of Urban Bank have started their due diligence on the bank in a bid to beat the April 26 deadline set by the Philippine Deposit Insurance Corp. (PDIC).

PDIC president Norberto Nazareno said the four commercial lenders interested in Urban Bank, as well as a group of depositors, have begun their repective due diligence work on the failed bank which will be their basis for submitting their takeover and rehabilitation plan by month’s end.

Nazareno said the PDIC is determined to find a new buyer for Urban Bank by April 26, a year after the bank declared a bank holiday. Otherwise, PDIC will be forced to liquidate the bank.

"We have to make a hard decision by April 26. We cannot open it without someone putting in money. If there are no takers, we have to liquidate it. We cannot keep on extending the deadline," Nazareno said.

But Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura said the PDIC should be more flexible and allow more time for a new buyer to come in.

"I think the PDIC just needs to get a commitment from a new buyer and then it can be flexible during the final negotiations," the BSP chief said.

Buenaventura said that rather than liquidation, Urban Bank, with about 14,000 individual depositors, will be better off undertaking a rehabilitation plan to return it to profitability.

He said that Urban Bank has nothing at this point except for "illiquid assets."

All of its assets are illiquid because all of the liquid assets were already sold to meet their liquidity problems when it was hit by heavy withdrawals," Buenaventura said.

The BSP chief said these illiquid assets include the bank’s non-performing loans as well as prime real estate assets which will be difficult to sell given the weak property market.

At the same time, the PDIC, has to ensure the commitment of three of Urban Bank’s major depositors, that they will convert their deposits into equity in the new bank.

"The PDIC also has to make sure these depositors work out an acceptable plan with the new owner for their trapped deposits to be converted into equity and later for them to have an exit mechanism at a favorable price," Buenaventura said. – Rocel Felix

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