Securitization: The Art of Global Fund Sourcing

By: Senatoriable #14 Baldomero Falcone

Function Rooms 1-4, Asian Institute of Management Conference Center, Benavidez

St., Makati City.

SECURITIZATION is the special skill/art /process of having viable and feasible projects and their comprehensive components (studies, land, raw materials, labor, proper technology, contracts etc.) entrusted to the Trust Department of a Commercial or Universal Bank in order to set up an Asset Pool Trust or Special Purpose Vehicle (SPV)

What is Securitization?

Under this Special Purpose Vehicle or Asset Pool Trust, the project proponent with the Trust Department of the Bank as nominee, co- issuer will be able to float securities/bonds or asset participatory certificates.

What is Securitization?

Features of these securities/bonds/asset participatory certificates, priorly registered with the SEC, will be longer in maturities, and will be wrapped up by the guarantee of an insurance firm or another standby bank in terms of return of principal and annual yields; hence they become investment grade and credit worthy.

What is Securitization?

The yields will be better than the T-Bills of the Central Bank and so they will be able to access not only the three (3) trillions of Trust money (per CB report) held in the trust departments of our banks(BDO, BPI, and others)but also the global funds(other trust money in other banks, high-net worth individuals and multinational corporations) around the world that like water always seeks its own level.

What is Securitization?

All sales emanating from these bonds/securities will be controlled by the supervising body composed of representatives from the trustee bank, the proponent company, the contracting/executing company and an audit company who together will decide on the proper and timely exclusive application of funds for the strategic project to be established.

What is Securitization?

Once the project is functioning and its viability assured, and the monies plus promised yields of the investors/participants have been returned, the asset pool trust or special purpose vehicle is collapsed and the established project is given back to the original project proponent/entrepreneur.

What is Securitization?

Unpaid investors can have the option to join the original project proponent in the management of the new business.

What is Securitization?

SECURITIZATION thus will create more businesses all over the country and will create hundreds of thousands of jobs.

What is Securitization?

It will not make our governors and mayors too dependent on their IRA, but with good potential projects coming from their respective provinces together with the entrepreneurs from the private sector (in the spirit of PPP) can go around the restrictive credit conditionalities put on by our oligarchic banking industry.

What is Securitization?

After all securitization is tapping not the bank's tight credit wherein the banks have deposit liabilities but the more liberal trust money.

What is Securitization?

With thousands of graduating students and Filipinos knowledgeable in securitization, given the proper moral and financial encouragement and by the promotion of the government , we can definitely usher TO A MUCH FASTER MODE the ECONOMIC RENAISSANCE FOR THIS COUNTRY THAT WHICH WE ALL HAVE BEEN LONGING FOR.

What is Securitization?

The reason why I am pushing for Securitization is that this is one sure method of increasing the deliberately-made-scarce money supply in the country controlled by the few oligarchic families(scared of competition) who own and control the universal banks – same families have made the majority appointments to the monetary board which decides the level of money- supply for circulation.

Why Securitization?

Some studies for example show that the existing money in relation to the national GDP is very much lower in ratio than that of comparative ratios in the progressive neighbor nations around us.

Why Securitization?

Hence, a real honest to goodness legislative study and measure must be made to really find out what should be the ideal money supply in circulation to make all productive Filipinos contribute to the economic renaissance of our country, given its so many natural resources and so talented people.

Why Securitization?

Let me cite an example: why can't we push for integrated coconut factories in all the provinces which have abundant coconut trees, integrating the production of coir, activated carbon from the coco shell, coco sugar from the meat and healthful coco drink from the water?

Why Securitization?

Initial studies show that instead of just 2-4 pesos per nut that a coconut farmer presently received, under an integrated coco factories scheme, each coconut farmer would be receiving at least 50 pesos per nut, thus enabling real economic sufficiency to reach our countryside, besides enabling hi-value exports instead of just copra.

Why Securitization?

Securitization would be one sure way of raising domestic and global funds for financing hundreds of these integrated coco factories, without touching the national budget.

Why Securitization?

Thus, this is the one sure way of increasing the money supply in circulation in the country and in the countryside, enabling all youth from all sectors, from the cities and the professionals sons and daughters as well as from the countryside farmers, rice, corn , sugar and coconut etc. to fund their needed education for sufficiency.

Why Securitization?

Coconut is just one it. We have bamboos which under present technology can be engineered to be stronger than hardwood ; kapok whose cotton can be ideal non-pollutant inexhaustible fuel;

Why Securitization?

Some might be surprised of what we can do with LAHAR. Lahar has at least 5 to 10 percent of magnetite iron sand which can be our raw material for a steel mill (for securitization) considering that lahar, according to the DENR is here to stay with us until one hundred years and even more as every rain would increase these blessings of lahar.

Why Securitization?

Look around, undeniably, we have so many natural resources. Plus, we have so many talented Citizens. Deliver the securitization concept in the hands of so many enlightened governors, mayors, coops, private and non-public institutions and individuals, schools, faculty and students, can surely usher this nation into the economic renaissance that which we all have been longing for, more so, it will be within our lifetime.

Why Securitization?

"Daang matuwid" through dole-outs alone and the current policies, cannot solve the increasing poverty in this country. It should be combined with the implementation of Securitization.

LET'S DO IT!

BAL FALCONE SENATORIABLE

Why Securitization?

1. Proponent has very good project (Profit and Loss Statement, Initial Balance Sheet, Cash-flow Projections, etc.)

2. Goes to Trust Department of a Commercial or Universal Bank (Local, or Foreign Bank w/ Trust Department)

3. Create an Asset Pool Trust (APT) it is a non-registered entity.

4. Goes to Insurance Companies or Banks who will issue Stand By Letter of Credit (SBLC) guaranteeing the payment of the Principal and its yields.

5. APT floats be Registered with Securities & Exchange Commission (SEC), make known to the public, Securities/Bonds/Asset Participatory Certificates

6. Goes to Underwriter or Licensed Seller of Securities

The Securitization Process

7. All Revenues must be controlled by a committee or project board composed of auditor, trust department, insurance firm, project proponent company and works engineer to prevent diversion of fund.

8. All Revenues Gathered for Redemption of all APC/Securities under promised yield.

9. Once all redeemed the Trust is collapsed and entire full blown project goes to original project proponent.

10. Or, if some bonds are unredeemed the owner of the unredeemed securities participates in the management of the project.

The Securitization Process

1. Creation of Asset Pool:a. Land & Existing Improvementsb. Development Masterplan Purchased order from Purchaser (Mang Inasal) Availability of Lands, Water Supply, Feed Supply,

Medicines, Expert, and Technical People, etc that will work towards the success of the project.

a. Sales Proceedsb. Development Incomec. Value Appreciationd. All Other Future Revenues & Assets

Example: Native Chicken Hatchery

2. Creation of Business Plan:a. Project Descriptionb. Target Marketc. Development Plans and Timetabled. Implementation Strategiese. Financial Projections

Example: Native Chicken Hatchery

3. Create Offering Prospectus (Project Study) and present Enhancers (insurance that guarantees)

Which Insurance Firm (Guarantee Cover) or another Bank who will issue SBLC (bank guaranty) will guarantee each stock certificate. (Proponent will spend for printing cost and premium for guarantee)

Example: a certificate of 50,000 php the insurance company will charge usually 2% premium.

If government housing it will be guaranteed by Home Guarantee Corporation

Example: Native Chicken Hatchery

4. Create Offering Prospectus (Project Study) and

Go to the Securities and Exchange Commission (SEC) for a license to sell Project Participatory Certificates (PPC) or Asset Participatory Certificates (APC), Investment Certificates, Bonds or Securities to the Public.

Example: Native Chicken Hatchery

5. Market the Securities Go to an underwriter/s for either FIRM or

BEST OFFER for purchase of these securities.

6. Use & Management of Funds All the money are pooled and entrusted to a

project board or committee to avoid diversion of funds and proper exclusive application of funds to project.

Example: Native Chicken Hatchery

After allocating 10% to 15% of the funds to Administrative Expense

All funds are entrusted to sole application to the specific project.

If the projects is making money the first application of the funds is to retire APC/PPC/Bonds/Securities.

Example: Native Chicken Hatchery

Issuer, Landowner and Principal Funds Beneficiary

BASES CONVERSION DEVELOPMENT AUTHORITY2/F Rufino Pacific TowerAyala Avenue, MakatiTel. No. 813-53-89 to 90

Lead Underwriter and Issue Manager

PHILIPPINE NATIONAL BANK2/F PNB BldgEscolta, ManilaTel. No. 402-051

Project Manager PUBLIC ESTATES AUTHORITY7/F Legaspi Tower 200Paseo de RoxasLegaspi Village, Makati CityTel. No. 817-4711

Example: The Heritage ParkParties to the Offering

Trustee PHILIPPINE NATIONAL BANKTRUST BANKING GROUP8/F PNB Bldg., Escolta, ManilaTel. No. 402-051

Co-Lead Underwriters ALLIED BANKING CORPORATION6754 Ayala Avenue, MakatiTel. No. 818-79-61

EXCHANGE CAPITAL CORPORATION151 Paseo de Roxas, Makati CityTel. No. 815-4880

RCBC CAPITAL CORPORATION8F-Y Tower, Alfaro Cor. Gallardo StsSalcedo Village, Makati City

Example: The Heritage ParkParties to the Offering

Participating Underwriters CORPORATE INVESTMENTS PHILIPPINES, INC.9/F Valero Tower122 Valero St., Salcedo VillageMakati City, Metro ManilaTel. No. 843-5426 / 810 1809

FIRST METRO INVESTMENT CORPORATION4/F Metro Bank PlazaSe. Gil Puyat AvenueMakati City

SECURITY BANK AND TRUST COMPANY4/F, Metro Bank PlazaSen. Gil Puyat Ave., Makati City

Example: The Heritage ParkParties to the Offering

Legal Counsel to the Issuer

OFFICE OF THE GOVERNMENT CORPORATE COUNSEL5th & 6th FloorsPhilippine Sugar CenterNorth Avenue, Diliman, Quezon CityTel. No. 99-61-34

Legal Counsel to the Underwriter

SYCIP SALAZAR HERNANDEZ & GAITMAITANSycip Law-All Asia Center105 Paseo de Roxas, Makati CityTel No. 817-98-11

Tax Advisors to Project Manager

PUNONGBAYAN & ARAULLO6/F Vernida VI BldgAlfaro StreetSalcedo Village, Makati CityTel. No. 810-9741

Example: The Heritage ParkParties to the Offering

Example: The Heritage ParkParties to the Offering

Receiving/Custodian Bank, Transfer and Paying Agent

PHILIPPINE NATIONAL BANKTRUST BANKING GROUP8/F PNB Bldg., Escolta, ManilaTel. No. 402-051

Planners to Project Manager PLANNING RESOURCES & OPERATIONS SYSTEMS (PROS)2/F Prudential Bank BldgOrtigas Avenue, San JuanTel. No. 721-1661

Business & Financial Advisors to Project Managers

STRATEGIES & ALLIANCES CORPORATION (SAC)12/F Century Tower100 Tordesillas StreetSalcedo Village, Makati CityTel. No. 812-90-02 / 813-68-77 to 80

Mabuhay!