NHMFC raising P715-M from asset-back notes issue

Published May 19, 2022, 2:33 PM

by James A. Loyola

National Home Mortgage Finance Corporation (NHMFC) is raising P715.15 million through a planned fifth securitization exercise called “BALAI Shelter Compliance ABS.”

This is for a portion of the socialized housing loan portfolio it acquired from the Home Development Mutual Fund (HDMF) in June 2019.


The planned issuance will consist of one tranche of Senior Notes and one tranche of Subordinated Notes.

The Class A Senior Notes are worth P570.0 million, and shall feature a principal-only bullet payment in five years. No interest will be paid on the Senior Notes.

The Class B Subordinated Notes are worth around P145.152 million, and will be paid after all Senior Notes have been settled. It will likewise not be paid any interest.

The Senior Notes will be exclusively sold to real estate developers. This is seen to serve as alternative compliance in relation to the requirements of the Balanced Housing Development Program.

The program requires developers to engage in one of the following: directly develop socialized housing, participate in a joint venture for socialized housing or take part in the community mortgage program of the government.

Philippine Rating Services Corporation (PhilRatings) has assigned Conditional Issue Credit Ratings of PRS Aa minus for the Class A Senior Notes, and PRS Baa for the Class B Subordinated Notes.

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

On the other hand, an obligation rated PRS Baa exhibits adequate protection parameters but may possess certain speculative characteristics.

Adverse economic conditions and changing circumstances, however, are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

A Stable Outlook was likewise assigned to the ratings. This means the rating is likely to be maintained or to remain unchanged in the next 12 months.

The ratings for the BALAI Shelter Compliance ABS are considered conditional until the executed documentation for the transaction has been submitted to PhilRatings for review.

The conditional ratings were assigned based on draft transaction documents, and will be converted into final ratings once PhilRatings has determined that the representations as stated in the initial documents are also captured in the final signed documents.

The main considerations in the assignment of the Conditional Credit Ratings and Outlook include the Asset Pool collection performance, ongoing pandemic and its effects on the economy, senior and subordinated notes structure, prepayment and interest rate risks, and transaction participants.

This is already the fifth securitization transaction entered into by NHMFC. The first four backing Asset Pools were from the same universe of assets. The latest Asset Pool, however, was acquired from the socialized housing loan portfolio of HDMF in June 2019.