HGC issues clarification

I write in relation to Ms. Mary Ann Ll. Reyes’ article titled “Questionable bond floats” in her column Hidden Agenda, which was published in the April 20, 2014 issue of The Philippine STAR.

We have already published our clarifications to the issues in a full-page advertisement in The Philippine Star and in other newspapers on March 30 and 31, 2014. Still, Ms. Reyes chose to repeat the allegations. Either she is being misled by her sources or she had decided to be partial about the allegations. All the information necessary to verify her allegations are available in our office. Since she never called us up, I am clarifying again the issues she raised.

On the alleged “huge financial losses” of HGC

The causes of the problem were the Asset Participation Certificates (APCs) – funded projects implemented from 1984 to 1999, which were approved by previous Boards. This happened before my appointment as HGC president in September 2010.

HGC guaranteed the APCs which funded various Urban Renewal Projects of the National Government and other mass housing projects by private developers. These APC projects failed resulting to guaranty calls of P16.45 billion including interests.

These projects failed due to the lack of due diligence in assessing guaranty applications and guaranty calls at that time, the absence of adequate safety measures, and the flawed project designs themselves.

After paying the guaranty obligations of the failed projects, HGC, in return, got properties with legal and physical problems.

One of these failed projects is the Smokey Mountain Reclamation and Development Project developed by Reghis Romero and R-II Builders. Romero failed to raise the project financing. To save the project, bonds were floated to raise the needed funds. HGC guaranteed payment for the bonds and assumed all financial obligations to investors amounting to more than P4 billion, including interests.

Again, the Smokey Mountain Project was started and failed before my appointment as HGC president in September 2010.

On the flotation of bonds

When the guaranty calls on the failed APCs were made, the previous HGC Boards resorted to the issuance of zero-coupon bonds to settle the guaranty obligations.  Details of the bond flotations are as follows:

On the ballooning of HGC’s debts from P9.8 billion in 2009 to P12.771 billion in 2011

As an unavoidable consequence of its bond flotations, HGC’s deficit ballooned due to payment of annual financial charges of P1 billion+.  

However, beginning in 2011, we were able to bring down HGC’s debts year by year, and the Net Income (Loss) of P354.1 million in 2013, still stood as the lowest.

Starting in 2011 to 2013, we have managed to make HGC a self-sustaining GOCC. We have been earning more than we are spending. For the last three years, our average total operating revenue stood at P716 million versus our average total operating expenses of P272 million.

We posted better financial performance in 2011, 2012 and 2013 than in the previous years. In 2013, we gained HGC’s highest Net Worth in the last five years. With total assets of P33.41 billion and total liabilities of P25.62 billion, HGC’s Net Worth as of Dec. 31, 2013 reached P7.790 billion. HGC projects a Net Income of P554 million in 2015 and P870 million in 2016. 

Notwithstanding our inherited problems, our improving fiscal performance has helped us regain the confidence of our clients. HGC’s new guaranty enrollments from January to April 2014 reached P14 billion for the purchase or construction of 9,800 new housing units. This is already 41 percent of our P34.6-billion target for 2014.

On the alleged use of the bond flotations to “finance” Delfin Lee’s housing projects

None of the APCs, on which the proceeds of the bond flotations were applied, were used to finance Delfin Lee’s housing projects. HGC has no involvement in the Globe Asiatique scandal. Following reports of irregularities committed by Globe Asiatique, we implemented a policy of “blacklisting” for guaranty cover all Globe Asiatique accounts.

On the non-consolidation of titles of acquired assets in HGC’s name

Most assets acquired from the failed APC projects, prior to their conveyance to HGC, were already saddled with legal problems, such as unpaid contractors, unpaid landowners, dissatisfied beneficiaries, and other third party claims. Most of these legal claims were annotated in the titles. This in turn makes it very difficult and expensive to consolidate titles in HGC’s name.

Moreover, the beneficial use of several of these properties is being enjoyed by government agencies, as well as by informal settler families that are difficult to evict due to cost constraints and to legal, social and moral considerations. Nonetheless, we have been able to sell some of these assets on an “as is, where is” basis.

On the alleged further destruction of acquired housing units because HGC did not protect and preserve them

Even prior to their conveyance to HGC, many of the assets were unfinished and were already burdened with legal and physical defects.  As a result, HGC could not immediately market the assets. Hence, we intensified marketing efforts, which include hiring auctioneers, accrediting more brokers and developing a web portal where all our housing units for sale are posted.

On the alleged long overdue account receivables of HGC

HGC has been persistently collecting its receivables. It has hired collection agencies to collect receivables from its housing projects.

Moreover, as HGC’s mandate is to promote homeownership, we have adopted several payment options such as condonation and restructuring programs that enable delinquent homebuyers to pay their arrears under reasonable terms and, at the same time, allow HGC to recover its financial exposure.

On the allegation that I approved HGC’s

retirement plan and car plan

We have already clarified that the HGC retirement plan was offered to HGC employees from 2004 to 2009. So, just like the retirement plan, the car plan was approved long before my assumption as HGC president. This is why the COA report and Atty. Allan Paguia’s complaint did not impute this allegation against me.

Atty. Paguia’s complaint is a mere rehash of the 2011 COA audit report. We have already sufficiently responded to COA on these audit findings.

For the sake of fairness and impartiality, I hope the foregoing finds space in your paper to clarify the issues raised in Ms. Reyes’ column.

Thank you.

Very truly yours,

ATTY. MANUEL R. SANCHEZ

President