8990 to securitize P2.4 billion residential contracts

MANILA, Philippines — 8990 Holdings Inc. plans to sell P2.4 billion worth of securities backed by housing receivables.

Of the total, P1.8 billion comprises tranche A certificates with a tenor of 10 years while the remaining P600 million will be amortized after all tranche A certificates have been fully settled.

The class A certificates benefit from an interest spread between the underlying asset pool and the interest rate to be paid to the certificates. This serves as the first buffer against credit losses or liquidity shortfalls in the transaction.

Given that the CTS receivables of the backing asset pool have fixed rates and that the interest rate to the class A certificate holders will also remain steady, the spread is seen to be maintained throughout the life of the transaction. Likewise, prepayment has been minimal historically. 

The P600 million class B certificates represent 25 percent of the total issue amount and 33.3 percent coverage of the class A certificates. 

The accrued interest payments to class B certificates will only be paid out once the class A certificates are fully paid.

Also, when losses exceed the value of the class B certificates, the Philippine government will provide a cash flow guarantee to address current shortfalls.

Local credit watcher Philippine Rating Services Corp. (PhilRatings) assigned conditional issue credit ratings of PRS Aa plus for the tranche A certificates, and PRS A for the tranche B certificates. 

Obligations rated PRS Aa are of high quality and are subject to very low credit risk. This means the issuer’s capacity to meet its financial commitment on the obligation is very strong. 

On the other hand, obligations rated PRS A have favorable investment attributes and are considered as upper-medium grade obligations.

Although obligations rated PRS A are somewhat susceptible to the adverse effects of changes in economic conditions, the obligor’s capacity to meet its financial commitments of the obligation is still strong.

 PhilRatings may also include a ‘plus’ (+) or ‘minus’ (-) sign to further qualify its ratings.

A stable outlook was also assigned to the ratings. It is defined as: “The rating is likely to be maintained or to remain unchanged in the next 12 months.”

The conditional credit ratings and outlook reflect 8990’s cash flows, the limited interest rate and prepayment risk for the transaction, the steady performance of the economy and the collection performance of its CTS receivables.

8990 has built a reputation of providing quality and affordable homes to consumers, from horizontal mass housing subdivision projects (DECA Homes) to medium-rise building condominium projects (Urban DECA Homes).