Teresita F. Solitaria. Assistant Vice-President, United Coconut Planters Bank Philippines

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1 Teresita F. Solitaria Assistant Vice-President, United Coconut Planters Bank Philippines

2 Established in 1963 Offers a full range of expanded commercial banking services including corporate loans As of Sept. 2016, the bank s total outstanding loans grew by 18.3% As of Sept. 2016, outstanding loans for production activities grew by 14.0% Main production activities pertain to: a) real estate activities, b) electricity, gas and air-conditioning c) wholesale and retail trade d) manufacturing

3 Clients are sole proprietorship and corporations Minimum requirements are: a) Three years Financial Statements showing profitable operations b) Satisfactory credit history c) Collateral Usual loan purposes are: a) working capital requirements b) expansion projects such as acquisition of real estate properties, construction and acquisition of machineries Loan products are usually: a) Credit Lines b) Term Loans

4 Example of a corporate loan product is Project Financing (PF) PF refers to long-term (10 years) financing or refinancing of capital installations which can be private or government - owned such as: a) Roads, bridges b) Airports c) Power generation plants &/or Electric cooperatives d) Renewable energy e) Manufacturing plants for Exporters f) Residential and Commercial buildings Minimum requirements are almost the same

5 Corporate entities or Special Purpose Entities are the usual institutions that require project financing such as power plants, electric cooperatives, government contractors or local water utility companies Many of these entities lack a one major requirement that is imposed on borrowers: COLLATERAL/ SECURITY Collateral in the form of real estate or chattel among others are considered crucial to secure creditors in cases of default Special Purpose Entities usually do not have traditional assets that can be considered as collateral and instead rely on their project s cash flow as the source of repayment for financing

6 A guarantee from a reputable institution such as the one provided by LGUGC addresses the collateral/security concern of institutions that require Project Financing While guarantees do not secure100% of the loan granted, they are able to address a minimum requirement imposed by creditors which is the security in cases of default

7 1. Guarantees enable creditors to finance projects initiated by cashflow-based special project entities 2. Guarantees present an opportunity for creditors to accommodate new borrowers by eliminating a traditional requirement and accepting an alternative 3. Guarantees allow creditors to finance projects whose end goal is to improve social services

8 Surigao del Norte Electric Cooperative - electric company servicing the province of Surigao del Norte - Project Description : To finance acquisition of a sub-station, transmission lines and upgrade of various sub-stations UGEP Solar 1 - engaged in business of promoting, developing, installing, owning, managing, maintaining and operating renewable energy and efficiency projects - Project Description : To partially finance the installation of solar roof panels under the proponent s Photovoltaic Installation Lease Agreements Montaño Construction - engage in general construction for more than 20 years now - Project Description : additional working capital of existing construction business.

9 Project Financing is a profitable business model It exposes creditors to innovative approaches such as the use of a guarantee instead of the traditional collateral It provides understanding on cashflow-based business models that could help in formulating credit policies which will make lending more accessible to new markets or borrowers

10 Guarantees currently bridge the gap between creditors and borrowers with no hard collateral available It provides a promising experience where creditors, unencumbered by the security concern, will be introduced to profitable business models that may require long-term financing The present sustainable experience between creditors and borrowers that utilize Guarantees to secure loans will serve as a learning opportunity for both parties to address various business concerns, mitigate risks and improve the lending environment