POSTSCRIPT / May 1, 2007 / Tuesday


Philippine STAR Columnist

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PNCC settling 26-year debt with Marubeni

SETTLEMENT: After 26 long years, the Philippine National Construction Corp. is finally settling an old debt incurred by its predecessor Construction and Development Corporation of the Philippines.

Ending a bruising battle in and out of court, PNCC finally threw in the towel and entered into a compromise agreement with Radstock Securities Ltd, the company that acquired Marubeni’s collectibles from it.

The compromise was forged after the Supreme Court refused to dismiss a collection case PNCC had lost in the lower courts. The two parties filed for SC approval. The High Court sent it to the Commission on Audit for review, twice.

Twice, too, the COA approved the compromise deal, the second time in a unanimous en banc decision.

The SC then remanded the compromise to the Court of Appeals, which had been involved in hearing the collection case — after dismissing PNCC’s effort to halt trial. The CA approved the deal late February.

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INTERVENORS: Several opponents have filed motions to intervene with the SC and the CA.

Stradec (apparently now identified with William Gatchalian) wants to get PNCC via the backdoor, having had its bid for the government-managed firm declared lower than the floor price set in the failed public auction.

Rodolfo Cuenca, CDCP boss, had to go through the motions — after ignoring the case crawling through the lower courts — as he is trying, unsuccessfully so far, to regain sequestered shares.

Luis Sison appears to be still smarting from his unceremonious exit from PNCC after a tumultuous stint that had employees up in arms. His heroic role these days belie the fact that he cost PNCC a million pesos in what looked like a campaign against union members.

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DRILON PLOY: The latest to join the fray is Sen. Franklin Drilon, who had waylaid PNCC’s franchise in the Senate, presumably because he did not like the compromise deal.

The franchise committee chair, Sen. Joker Arroyo, had to remind Drilon at one point that the Senate is not a courtroom.

It is not like Drilon, a lawyer, does not know the limits of legislative functions. But not content with sitting on a major issue of national interest like PNCC’s franchise, he went out of his way to convince reporters and columnists on his gripes.

It was just Drilon’s bad luck that few people had any trouble deciding that the acerbic Joker had triple his credibility.

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36 CENTS/$1: The compromise agreement cedes P6.2 billion to Radstock (or only half of the court-awarded amount of P17 billion). That amount is not even three times PNCC’s original debt of P2.4 billion (at present currency levels).

If you throw that to an accountant, he will tell you that the increase in value after 26 years is only about 4 percent per annum.

The settlement represents around 36 cents on the dollar, an average rate for similar cases under the government’s special assets vehicle (SPAV) program.

Radstock is exactly that — a special purpose vehicle controlled by a fund and overseen by an investment management group with a good track record in the acquisition of high risk Asian debt.

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PEDIGREE: Radstock’s directors include Sonny Dominguez, a former Aquino Cabinet minister, and Ian Christie, retired deputy commander of the British forces in Hong Kong. Dominguez likes to take on problematic cases that everyone has given up on and breathes back life into them.

Radstock is owned by the Fiduciary Asean Recovery Fund, managed by FidCo Investment Group Holdings, whose managing director, James Wadham, has impeccable pedigrees in the global financial services sector.

The conglomerate has done successful investments and reconstructions in Thailand, Indonesia and Australia similar to the Marubeni debt workout.

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CHASING ASSETS: There is no cash outlay under the compromise agreement. The assets under it are problematic, to put it mildly.

The 12.9-hectare property at the bay reclamation areas financial center is partially occupied by the Government Service Insurance System and another part is claimed by a PNCC creditor. There are lessees enjoying bargain rates all these years.

That alone will take plenty of negotiations and, given the ascendancy of government in cases like this, would probably make some dent on the assigned value of P4.195 billion, which Drilon claims is 70 percent of the P5.993-billion appraised value.

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NO PICNIC: The PNCC also ceded participation in the North Luzon Expressway toll collections over a 27-year period, at a net present value of P1.287 billion, given tax and a 15-percent discount rate.

The NLEx is the subject of a pending SC case. It may be affected by the expiry of PNCC’s franchise and, of course, is often hostage to public disaffection during bad times.

As for the PNCC shares of stock — with a par value of P2.3 billion (P713-million market value at the time of settlement) — that can only be transferred after PNCC settles all pending stockholder issues as part of its restructuring program.

It is not like Radstock is now going on a picnic. Anybody who says this was a walk in the park lives on another planet — or may just be lawyering in the guise of legislation.

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(First published in the Philippine STAR of May 1, 2007)

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