• PWU: Receivership, rehabilitation or liquidation?


    First of three parts

    WHAT do the Benitezes want for the Philippine Women’s University? (PWU) Is it receivership, rehabilitation or liquidation? The reports indicate their excitement over a court decision granting their petition for the rehabilitation of PWU to the exclusion of other stockholders like the Tanco group.

    Or is it corporate welfare (to borrow from the title of a book) that the Benitezes are after in filing a petition for rehabilitation?

    (The complete title of the book is “Corporate Welfare: The Mega Bankruptcies of the 80s and 90s.” Its author, Laurence H. Kallen, as described in an introductory note, “makes good use of his insider’s knowledge—gained in 20 years as a commercial and bankruptcy attorney.” It may serve as good reading material for both the Benitez group and the Tancos, who are the majority owners of STI Education Systems Holdings Inc. STI Holdings, in turn, has a huge claim over PWU’s assets by virtue of its exposure in it.)

    It is unfortunate that STI’s public stockholders may not be aware at all that they are being dragged into what could be a protracted court battle between two contending forces. That they are being taken for granted may be an understatement. As investors, their only concern would be their ownership in STI Holdings as a listed company that has significant exposure in PWU.

    Whether the Tancos’ claim against PWU could run into nearly a billion pesos or less, the most significant issue that the Benitezes may not care about at all is the fate of the public.

    By going to court, the Benitezes may have unnecessarily exposed themselves to public scrutiny while dragging STI’s individual investors into litigation. Who would stop STI’s small stockholders from questioning the Tancos why they had allowed STI’s exposure in PWU to have reached nearly a billion pesos? In turn, the Tanco group would toss the public’s query to the Benitezes and specifically ask them how the school had financially collapsed under the watch of the Benitezes. Were the members of the family overcompensated for their individual services?

    For redress, STI Holdings’ small stockholders could seek a comprehensive audit of PWU and its remaining assets by the examiners to be assigned by the Securities and Exchange Commission if ever their audit expertise is called upon.

    I have yet to see the court ruling on the petition for rehabilitation of PWU that was filed by the Benitezes. But from what I have read and learned in my years of covering company failures, a court does not grant automatic rehabilitation. Corporate welfare—I am using the phrase as it applies to PWU—is intended only to protect the school as a stock corporation by whichever group exercises management control. In the case of PWU, it may be the Benitezes who are tasked to protect the school’s recoverable and remaining assets. Then they could pose the question: protection from whom?

    How long is a “protracted legal battle”? No one knows the answer. A court suit could last as long as each side exhausts every legal remedy available to it. In short, it could end as early as two or three years, or it may last two or three decades or even longer until the fight reaches the Supreme Court. Who knows, the case could even be remanded for resolution by the SEC or to some other court where it had begun.

    In the meantime, allow me to define the three processes of corporate welfare. When quasi-reorganization—or stockholders’ intramural—was still under SEC jurisdiction, a petition was usually filed for “receivership.” This meant that SEC hearing officers were tasked to determine if a failed company deserved to be placed under receivership by ordering the creation of a receivership committee.

    In turn, the receivership committee would determine if such and such corporation should either be rehabilitated or liquidated. Any decision by the committee could be subject to review by the SEC’s five-man regulatory body composed of five commissioners, including the chairman. Any bloc or party not be satisfied by the SEC decision could go to the Court of Appeals and finally to the High Tribunal. How long would the appeal after appeal take for the court to decide would be anyone’s guess.

    Unfortunately, there is usually no timetable that lawyers follow when they go to court in fighting for the interest of their clients. Everything depends on legal strategies that would either delay the proceedings or speed them up.

    In the case of the PWU, the fate of the students is at stake. As for STI Holdings, the Tancos should be able to report something positive to the company’s stockholders if they would be able to collect the listed company’s loans to PWU.



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