The torturous road to corporate redemption

Marlen V. Ronquillo

Marlen V. Ronquillo

Troubled corporations, if they are well-connected and represented by legal teams close to the powers-that-be, will have no problem sailing through the corporate rough patches.

After all, what are all the connections for? Even the most outrageous of transgressions are smoothed over to pave the way to full rehabilitation.

How about those doing it the proper way? For example, a pioneering corporation that was a trailblazer in many ways and has opted to go through the by-the-book- rehabilitation manual of the Securities and Exchange Commission (SEC), right after getting entangled in the web of problems triggered by the Asian financial crisis on 1997?

For such corporations that follow the tuwid na daan, for those that want to get rehabilitated via nursing their wobbly corporations back to financial health and paying off creditors on time, the road is usually torturous, nasty and brutal. Such is the case of the troubled Uniwide Group, once a retail giant that generated a yearly cash flow of P20 billion before the 1977 Asian financial meltdown.

The efforts of Uniwide to get rehabilitated, to be back on its corporate feet, and compete anew in the retail mainstream, is a sorry chapter in the history of the SEC. It is Exhibit A of the heavy hand of a government agency, which mandate is to help nurture back troubled corporations—with marked success in their rehabilitation efforts—get full rehabilitation .

The latest on the Uniwide saga was deathly blow to the rehabilitation efforts of the retail pioneer. A SEC special hearing panel had issued a decision to terminate the rehabilitation program and sell off every asset that can be sold to pay off creditors . Rehabilitation, the panel said, was no longer an option .

The SEC hearing panel just echoed the immortal—and infamous—words of the US treasury secretary, Andrew Mellon, who helped abet the Great Depression. Mellon’s words amid the great meltdown were these : Liquidate, Liquidate, Liquidate. Mellon never gave those who argued for the massive pumping of government investments and extra-ordinary state intervention a chance to succeed. Had somebody more powerful intervened to stop Mellon from his crazy “ liquidate” prescription, the US would not have gone through a Great Depression .

Worse, on May 30, the SEC board upheld the decision to scrap the rehabilitation plan and go for the brutal “ liquidation ” option.

Were the two decisions fair? Or were they based on half-truths, not facts? On manipulated figures, not the real figures? What is the real score with the Uniwide rehabilitation? These are facts with regard to the state of the Uniwide rehabilitation .

The truth is the Uniwide group is almost over the hump and is scheduled to pay off its creditors fully in a couple of years or so. At the close of 2012, total liabilities was down to P1.7 billion from the almost P3 billion recorded in 2009. Of the P1.7 billion debt remaining , P1.3 billion is secured and P400 million unsecured.

The Uniwide, despite the loss of many of its assets, has still valuable real estate within its property portfolio. The four-storey Metromall in Las Pinas is on a 5-hectare highly commercial area and has been appraised at P3 billion. The Las Pinas property alone is almost twice the value of its entire liability, both the secured and unsecured portion.

At the close of 2010, it had paid P6.16 billion of its P7.5 billion in secured debt, for a 82 percent repayment. It was also on track with the terms of its 15-year rehabilitation program.

Of the over a hundred creditors , only six creditors opposed a rehabilitation plan for the Uniwide group.

The two major creditor banks originally opposed to the rehab program are now discussing restructuring terms with the Uniwide people .

To justify the decision to scrap the rehabilitation—which is on track using all metrics and benchmarks—the SEC special panel may have inflated the liabilities of the retail group and gave little value to the assets remaining .

But should a dreaded liquidation take place, auctioneers would be selling off roughly P30 billion in Unwide assets.

As the Unwide group has crossed the threshold of corporate wreck and is about to move up to viability , the SEC is bent on fast-tracking the process of liquidation. Why? This is quite easy to answer. In a decade or so of the entire Unwide rehab process, so many fees and charges had been earned by the SEC people, while the efforts to help get back the pioneering company on its feet had been a sham.

The SEC , at some point in the rehab effort, even presented a “ white knight”, a French company that was supposed to bail out Uniwide through fresh capital injection. The proposition from the French company was this: buy out Uniwide for a song.

The liquidation order’s true purpose may be to cover up the ghastly and reckless handing of the rehabilitation program and the gross incompetence of the people with the specific mandate of helping corporations in trouble get the redemption due them.


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