Quasi-reorganization to wipe out Philrealty’s P2-B deficit

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Emeterio Sd. Perez

Emeterio Sd. Perez

PHILIPPINE Realty and Holdings Corp. reported a deficit of P1.8 billion as of June 30, 2014, up 2.9 percent from P1.8 billion as of Dec. 31, 2013, on account of its net loss of P50.3 million in the first six months. Said accumulated losses could even hit P2 billion by the time the company applies the ultimate remedy to a deficit-laden company.

At a glance, it would appear that Philrealty did well in 2013 with a net profit of P286.7 million against a huge loss of P256 million in 2011. In between these two years, it reported a net income of P644,730.

But look again. Philrealty’s revenues last year included P64.9 million and P53.7 million representing gains from the sale of investments in a subsidiary and gains from the sale of investment properties, respectively.

On the other hand, Philrealty’s revenues from real estate sales, its core business, drastically dropped to P180.2 million last year from P381.1 million in 2012.


Executive compensation
Despite its burgeoning deficit, Philrealty was able to pay its executives and directors a total of P212.7 million from 2011 to 2013. Of this compensation, P1 million represented their per diem.The company did not pay its management team “bonuses” and “other annual compensation.” The two items were left blank in its compensation filing.

Probably because Philrealty which is under rehabilitation has been slowly recovering, it has been generous to its executives. It said it increased by 45.4 percent — to P15.1 million in 2013 from P10.4 million in 2012 — the pay and perks of its six highest-paid executives.

Philrealty has 26 employees consisting of eight execs, two managers, two operations staff, nine administrative staff and five clerks.

Quasi-reorganization
In a quasi-reorganization, the stockholders are the only losers. Forget the creditors who had collected the interest payments on their loans or exposures, and the majority stockholders who are represented in the board and are well-compensated.

But to the small investor who trades in listed stocks, a quasi-reorganization which is expected to fully rehabilitate an ailing or financially distressed company would be much better than liquidation.

With its deficit of P1.8 billion as of June 30, Philrealty had no other recourse but to undertake a quasi-reorganization. The process involves the reduction of the par value of the company’s capital stock, that is, from P1 to P0.50 per share. The result would be a reduction surplus of P433.3 million. (Based on the six-month financial report: P4.5 billion outstanding capital divided by 2 = P2.25 billion minus P1.8 billion deficit = P433.3 million. Based on the PSE website: P4.5 billion divided by 2 = P2.5 billion minus deficit = P647.5 million reduction surplus.)

Ownership update
Aberdeen Asset Management Asia Limited sold 361,900 shares in Manila Water Co. at P28 each on Oct. 22 and 695,000 shares at P28.11 each on Oct. 21. The sale reduced the holdings of the Singapore-based investor to 100.4 million shares or just a bit under 5 percent.

Back in July, the number of MWC shares Aberdeen Asset owned was 101 million or 5 percent after buying 623,300 shares in two trades – 463,300 shares at P27.38 each on July 8 and 160,000 shares at P26.16 each on July 15.Stockholders who hold five percent or more of outstanding shares in listed companies are covered by the ownership disclosure rule of the Securities and Exchange Commission. This means that said stockholders are required to report any acquisition or sale of their holdings.

Ayala Corp., the listed holding company controlled by the Zobel family thru Mermac Inc., which is not listed, owns 791.9 million shares, or 39.3 percent. Said ownership makes it the single biggest significant owner of MWC’s 2 billion outstanding common shares.

Reduced deficit
Here is another listed company that has been reporting huge losses that, as of July 2012, it had a deficit of P1 billion.

The company is Prime Orion Philippines Inc. (POPI), which owns a 22-hectare prime property in a prime location that is Divisoria.

In a PSE posting, POPI said it has succeeded in reducing its deficit to P343.2 million in 2012 and to P123.4 million in 2013. It still had additional paid-in capital (APIC) of P829.9 million which, if applied, could wipe out said deficit.

POPI reported net income of P205.9 million in fiscal year ending June 30, 2014; P721.2 million in 2013; and P102 million in 2012. These annual profits resulted from revenues of P824.7 million in 2014; P1.1 billion in 2013; and P1.3 billion in 2012.

esdperez@gmail.com

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2 Comments

  1. So did i understand this right, the company made a huge loss & the top people who are actually in charge & should take the blame, each got a 45% pay rise. Are you kidding me. Well a very popular saying springs to mind here, ” only in the philippines “.