SEC, SolGen clash on PLDT alien equity
BAGAC, Bataan – Tucked into this rustic village on the west side of this historic peninsula is Montemar Beach Club, a plush resort quickly making up for the years of neglect that saw an erosion of its facilities and clientele.
Its remarkable turn-around is a story worth retelling and studying. While entailing more than P180 million, its physical and financial rehabilitation that began in 2009 did not cost the majority owner anything in terms of capital expenditures or external funds.
In 1992, the beach club then under the control of the Cachos was on the verge of bankruptcy and foreclosure. When I was here two years ago, I saw why the once prime resort had gone to seed and its patrons continued to dwindle.
I muttered why we had to motor all the way to Bagac for something third rate. The resort was obviously mismanaged, neglected and run-down. I learned later that over half of its members were quitting in dissatisfaction, leaving P40 million in unpaid dues and bills.
The club was opened to the public in 1999 just to remain viable, but the yearly losses kept piling up, thereby eroding the shareholders’ equity to P56.3 million, or almost half the value in 1992.
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BAILOUT: Last year, majority owner Philcomsat (Philippine Communications Satellite Corp.) stepped in to bail it out. It put in P52 million for the banks, P7 million for the Cachos, P90 million for renovation, and P32 million more as advances and leases.
That is a total infusion of P181 million, plus over P20 million in interest payments on the advances and leases that will be paid back. With new equity funds, Montemar is recapitalized with P120 million in shareholders’ equity.
For this bailout, Philcomsat becomes a 60-percent owner. Recall that despite its substantial exposure, it had no control and no board representation from1992 through 2008.
For 16 years, the club was under the control of a board of trustees and Vicky Gonzalez, who was trustee, president, chief executive and general manager.
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HORROR STORIES: The new officers, some of them from Philcomsat, talk of how the old trustees and managers appeared to have been unaware, to say the least, that the financial statements produced by their accountants were falsified from 1999 to 2008.
They tell horror stories of how the signature of the external auditor was allegedly forged and the stamp of the Bureau of Internal Revenue faked to make it appear that Montemar management was timely filing with the BIR.
At the end of 2008, when Philcomsat directors uncovered what they said were anomalous financials, they asked for the resignation of the Montemar board and completely overhauled the club’s management.
Gonzalez, the trustees and the resident manager were removed. A new group, with Katrina Ponce Enrile as chief executive officer, took over.
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MESS EXPOSED: Ponce Enrile talks of having found “a totally dilapidated club with filthy out-dated guest rooms, a disfunctional dirty kitchen where third-rate carinderia food was being cooked but could barely be eaten, and unkempt grounds and beach.”
She recounts how they found “a bloated unmotivated staff, housekeeping found sleeping or watching TV in the guest rooms, wait and kitchen personnel pilfering food supplies, lifeguards (six of them) nowhere to be found even when children were in the swimming pool.”
“Cleaners habitually shoved garbage and debris under the shrubs and bushes,” she continues, “and gardeners allowed the grass to turn brown and fallen leaves to pile up.”
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TURN-AROUND: For immediate remedial measures, Ponce Enrile says, “we cut costs by streamlining the organization, retrenched superfluous staff, eliminated unnecessary expenses, trained the remaining staff.”
Consultants were brought in “to do the badly-needed rehabilitation, much of it for the kitchen and dining room, the guest rooms and the grounds.”
While all that was ongoing, the resort was hit by typhoons Ondoy and Pepang in 2009, causing cancellations and days of shut-down for repairs and cleanup. The club’s revenues dropped 27 percent that year.
But after one year under the new management, Montemar reported profits of P6.9 million from operations, which Ponce Enrile says was the largest in the corporation’s 30-year history of losses.
Word about the upgraded Montemar has gotten around so that the share price that dropped to P40,000 during the bad years had bounced to P45,000 at auction last February. Ponce Enrile says they get calls everyday from people interested in acquiring shares, but none is available.
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EQUAL PROTECTION: In the Supreme Court ruling striking down the Truth Commission created to pursue big crooks in the past administration, the key question is not whether or not anomalies occurred during the term of then President Arroyo.
High crimes and irregularities are committed in all administrations. The issue is whether or not creating such a plenipotentiary commission to dig out crimes only in a particular administration is a violation of the equal protection clause in the Constitution.
The Supreme Court has ruled that it is a violation. That there were some anomalies committed during the term of Ms Arroyo is not the central point. It is not right, the SC said, to zero in on just that while violating basic constitutional rights.
Obviously, one way out for President Aquino is to rewrite the order creating the Truth Commission to include all major irregularities committed in the past. But then, that investigative task is already assigned by the Constitution to existing bodies.