The Turnaround Man

Written by Dennis Estopace / Reporter

Wednesday, 18 February 2009 19:28

IT was a phone call that a trader moving billions of pesos in a minute least expected: leave all that for public service. “With his unblemished past as a student political leader, Bong [Gonzalo Benjamin] Bongolan never hesitated when that call came,” Association of Securities Analysts of the Philippines director Astro del Castillo told the BusinessMirror. Del Castillo said hiring Bongolan as president of state-owned and -controlled Home Guarantee Corp. (HGC) “is one of the best decisions that emanated from government.” Seven years ago, when the Philippine government sought to address a severe housing problem, it discovered one of its pillars, the HGC, was in a rut. That was a time when the real-estate industry was also trying to stand from kneeling after the bubble burst in 1997. HGC was one of four key agencies tasked to implement the National Shelter Program. But it was saddled with P16 billion worth of unpaid guaranties and only P300 million in cash. “It was a great turnaround,” del Castillo said, adding that the turnaround was timely as a subprime housing crisis reached untenable proportions in the United States and, ultimately, cast shadows of the 1997 crisis on the local market. Del Castillo said Bongolan’s savvy maneuvering of the circuitous route to a debtless HGC for the past seven years is “classic Bongolan.” “He was able to maximize that small cash and the opportunities presented by the capital market. That skillful management should be mimicked by other chief executives of other GOCCs [government-owned and -controlled corporations].” Del Castillo added that for one to do that, “he or she must have the trust and confidence of the market. Because he’s one of ours, that was easy because we’re a small group of traders.” He said the market was also infected by the aggressive tack taken by HGC. Without HGC moving ahead to raise zero-coupon bonds at a time when the real-estate industry was slow in picking up, “investors wouldn’t also share the same level of aggressiveness and bullishness.” “Remember that the HGC guarantees housing loans for small and retail housing projects. So when the market saw the government—as represented by Bongolan—was willing to take the risk, they welcomed the move and shared in the optimism.” Guarantor AS mandated by Republic Act 8763, or the Home Guaranty Act of 2000, HGC helps fulfill the dream of the Filipino masses to own a home. The new Charter has endowed the HGC with a modified mandate, a bigger capitalization and greater guaranty capacity that would adequately equip it with the new challenges, the Commission on Audit said of the GOCC. Bongolan explained that while the National Housing Authority is concerned with the production of homes and upgrading slum areas, the HGC provides risk coverage, especially on loans taken via the Pag-Ibig fund facility. He is modest on long-time friend and market-trading colleague del Castillo’s praise. “I just did what I think can help make public service more efficient and reach the people in time,” Bongolan said. The BusinessMirror sought Bongolan’s views on the future of low-cost housing in the country amid fears that a US economic recession could impact the Philippines, America’s long-standing trading partner. He said based on studying the market and long-time experience in the stock market, the Philippines should expect a slowdown in growth, “not a contraction.” That’s why, he stressed, “it’s important for us to pay all our debts immediately so as not to add further to worries over the crisis.” Bongolan said he’s not postponing the planned floating of government securities during the second quarter of this year. “If we help fuel optimism, more people will have a chance to fulfill their dreams of having a house of their own.” The guaranty provided by the HGC for housing projects is crucial in sustaining the growth of the housing sector since it gives lending institutions, such as banks, more confidence in providing much-needed funds, in the form of loans, for housing projects, he explained. Bongolan, a former professor at the UP College of Economics, said he bases his optimism from a macroeconomic perspective, studying the monetary environment and price variables as correlated to the gross domestic product. Basically, these came from his training and experience first as a student activist, then as teacher and, later, as equities trader. Now on his second term as HGC chief executive, Bongolan said he expects to end the year having paid off all the company’s debts, now only at P4 billion, owed to the Social Security System. “We started paying first the banks. We were lucky we got P8 billion as equity from the national government. With additional income from sales of foreclosed assets, we’ll be in the black operationally this year.” Action man THE past years, however, were not easy for Bongolan. Temptations of going back to the private sector remained: luxury cars, appetizing salary packages, and a salacious work schedule. This was according to del Castillo, who said Bongolan was really missed. “His work ethic is admirable. As far as I know, he always makes decisions based on deep study. Imagine doing that in minutes, seconds, because trading activities require that rigor.” Bongolan said he brought into HGC that discipline of basing decisions on careful study. The man teaches equities to his 140 staff —trimmed from 500 in 2002. It was difficult, he says, because before he managed money, which is quite “different from managing people.” Still, the streamlining was accomplished as he said he was able to make the people decide for themselves. “I was honest and frank with them that the company’s current condition of being saddled with debt was unsustainable.” Having trimmed the work force by 70 percent helped them save HGC millions in savings, as monthly payroll expenses fell 60 percent to P10 million. Without that understanding and support by the employees, Bongolan said he didn’t think turning around HGC at so short a time would have been possible. Still, Bongolan said he also credits the support of key officials of the Housing and Urban Development Coordinating Council for HGC’s ability to meet all the challenges that came its way. “Determining the pace and arena to face these challenges are the two important components for public servants attempting to change people’s lives for the better.” Having such fierce determination, “who but Bongolan and the best minds like him would you call?” del Castillo asked aloud.