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THE Philippines’ top steel industry players located in Batangas
prayed before the Court of Appeals (CA) to enjoin the implementation
of a rehabilitation plan sought by Banco de Oro-Equitable PCI Bank,
one of the steel corporation’s creditor banks.
In a 50-page petition for review on certiorari
before the appellate court, the Steel Corp. of the Philippines asked
the CA to junk the ruling made by the Batangas City Regional Trial
Court placing the firm under rehabilitation.
The petitioner feared that the real intention
against them is not rehabilitation but a take-over of their
management.
The said corporation reportedly has a total debt
of P7.205 billion, and total physical assets of around P13 billion.
It is the country’s biggest integrated flat steel mill producing
cold-rolled coils and steel products used in construction,
appliances, automotive, architecture, furniture, cans and other
consumer products including roofing for houses.
“A straight-forward rehabilitation of Steel
Corp. is not what BDO-EPCIB had in mind. In a conspiracy with its
handpicked rehabilitation receiver and his appointed financial
adviser, BDO-EPCIB embarked on a quest for a take over and
management control of Steel Corp.,” the petitioner said.
The petition avers that the Batangas RTC
committed an error when it violated the firm’s right to due
process when the court granted BDO-EPCIB’s petition despite the
fact that the lower court itself is not experienced in
rehabilitation matters.
“What is more appalling is the brazen approval
of the rehabilitation plan when [the lower court] no longer had
jurisdiction over the proceedings because of the lapse as of August
23, 2007 of the mandatory period for approval of a rehabilitation
plan under the interim rules [on corporate rehabilitation],” the
pleading stated.
The issues began when the Steel Corp. put up a
plant in Balayan, Batangas in 1996. A syndicate of local and foreign
banks and financial institutions provided project loans of P3.1
billion within the first ten months of operations ending in December
31, 1999 when the company’s generated revenue was P2.4 billion,
with a net income of P329.5 million.
After the 1997 Asian financial crisis there was
an escalation in the project cost by approximately P3.3 billion and
delay in the completion of the Balayan plant. As a consequence,
Steel Corp. was unable to fully enjoy the grace periods on its loans
as the amortizations started on the same year the project became
operational.
In 1998, in order to complete the project, the
parent company of Steel Corp., Philsteel Holdings Corp. infused an
additional P1 billion into the project.
However a sudden huge devaluation of the peso
against the US dollar resulted in foreign exchange losses to Steel
Corp. of some P1.3 billion. Despite principal payments of $13.8
million from 1999 to 2000, the peso equivalent of the dollar
denominated loans ballooned.
But in the year 2001, it could not meet its
scheduled loan amortizations without further depleting its working
capital and adversely affecting its operations, Steel Corp. and its
creditors agreed to reschedule the loans.
Included in the agreement is to put up a
revolving trade financing line in the amount of P500 million. In
exchange, Steel Corp.’s shareholders or new investors were to
infuse P550 million in additional equity into the company to be used
exclusively to settle the subject P500-million financing line.
BDO-EPCIB acted as the lead bank and agent until the suit came
about.
-- Jomar Canlas
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