WILL East West Banking Corp. eventually engage businessman Lucio Tan in a court war after Victorias Milling Co. (VMC) rejected the conversion of its more than P366-million loan into common shares?
The conversion will enable the bank to elect its nominees to VMC’s 11-person board.
If Allied Banking Corp., which is owned by businessman Lucio Tan, has been allowed such a debt-to-equity swap, why not grant East West Bank the same privilege as a creditor?
EastWest Bank is the banking unit of the group of companies owned by businessman Andrew Gotianun and his family. It has been rebuffed in its bid to become a stockholder by converting its P366.1 million loan into equity.
As in the past, VMC will hold its annual stockholders’ meeting away from the public, with Victorias Golf and Country Club in Negros Occidental as the venue. Would Mr. Tan either invite or allow the Gotianuns to attend the meeting?
A public ownership report as of Dec. 31, 2015 listed only LT Group Inc. – LT stands for Lucio Tan — as direct owner of 538.75 million VMC shares, or 18.49 percent. Of course, Mr. Tan owns more than what is credited to Allied Bank.
As the majority stockholder, Mr. Tan will surely play a major role in VMC’s yearly gathering of owners. Because he may be too busy with other business commitments, he may choose to send his representatives instead.
The same posting on the website of the Philippine Stock Exchange identified two other principal or substantial stockholders of Victorias. Premier Network International Ltd. of Quastisky Bldg., P.O. Box 4389 Road Town, British Virgin Islands, owns 751.6 million shares, or 25.8 percent, while Narra Capital Investment Corp. holds 160.84 million shares, or 5.52 percent. The ownership filing identified Premier as the only “indirect” stockholder, but did not name for whom it holds said block of VMC shares.
As for the public, the POR listed them as owner of 1.1 billion VMC shares, or 37.84 percent. Ironically, the public investors are not represented on the board.
Here is the irony of ownership filings that the Securities and Exchange Commission has never bothered to correct. A filing posted by VMC itself named PCD Nominee Corp. as the single biggest stockholder, with 1.26 billion shares, or 43.19 percent.
In an explanatory note, PCD said “the Company has no record of the beneficial owners of shares lodged with the PCD.” “Company” refers to Victorias Milling.
Once known as the biggest sugar central and refinery in Asia, VMC is again profitable. In the past three financial years ending August 31, it reported net profits of P1.08 billion in 2015; P869.07 million in 2014; and P671.72 million in 2013. These resulted from revenues of P5 billion; P5.01 billion; and P4.4 billion, respectively.
Apparently, VMC has been generating profits because with the conversion of its maturing debts into equity, it has less interest payments to meet or has not been paying interest at all.
Yet, not every bank benefited from Victorias’ long-awaited financial recovery. The Gotianuns have gotten the check payments for their bank’s loans to VMC but chose to swap them with VMC voting shares by rejecting VMC’s payments. The checks due them have been turned over to the SEC-appointed rehabilitation receiver for safekeeping, which the SEC’s five-person regulatory body acknowledged in an en banc meeting on Aug. 11, 2015.
Again, the question is: Is East West Bank ready for a protracted legal battle? In case it decides to go to court, it has to contend with a battery of lawyers that VMC has hired to defend it against a litany of court cases.
A VMC filing listed the following lawyers as its external counsels: Hilado Hagad & Hilado Law Offices; Villanueva Gabionza & De Santos Law Office; Hechanova Bugay & Vilchez; Quiason Makalintal Barot Torres Ibarra & Sison; Zambrano & Gruba Law Offices; Manuel Lao Ong & Linus G. Abaquin Law Firm; Torres & Sy Law Offices; Puyat Jacinto & Santos Law Firm; Puno & Puno Law Offices; Roxas De Los Reyes Laurel Rosario & Leagogo Law Offices; Adarlo Caoile & Associates Law Offices; Paner Hosaka & Ypil Attorneys-At-Law; Atty. Linus G. Abaquin, Sabig, Sacramento Law Office; Yulo Villarin & Barcelona Law Offices; Atty. Edmundo F. Manlapao, Jr., Valencia Ciocon Dabao Valencia Dionela Pandan Rubica Garcia Law Office; and Montoro, Malunes, & Mampang Law Office.
Mr. Tan will definitely hire his own private lawyer or lawyers to personally defend him from any suits that may be filed by EastWest Bank. Will he send any of his legal counsels as observers by assigning them nominal VMC shares to qualify them also as stockholders?
Incidentally, VMC reported under “Cost of Goods Sold” that it incurred “professional fees and contracted services” amounting to P112.3 million in 2015; P159.46 million in 2014; and P207.12 million in 2012. It did not say if all these payments, totaling P478.9 million, went to the lawyers.
By the way, many years ago when I was still a beat reporter, a lawyer told me that Mr. Tan hired all the best lawyers, leaving no one for the others to do battle with him. Is that true? Just asking. Said lawyer may be reading this piece, but I would not know if he would be able to recall our brief conversation about Mr. Tan.