Victorias Milling’s P2.804-B retained earnings


Emeterio Sd. Perez

THE legal battle between government-owned Land Bank of the Philippines (LBP) and Victorias Milling Co. Inc. (VMC) is worth watching. Any decision reached by the courts will affect other depressed companies that are under rehabilitation. Should LBP succeed in collecting P409.814 million from VMC, it could use the court decision in its participation in other bankrupt companies being managed by rehabilitation receivers.

In effect, creditors will be encouraged not participate in the conversion to equity of their loans because they could collect their exposure by foreclosing properties that they have taken over. Of course, lawyers can argue differently based on the provisions of the law.

The court war between LBP and VMC could be long. No one knows when it will end and who will eventually win. They will be raising their respective arguments before the Court of Appeals, which last year decided in favor of VMC by ruling that “the subject complaints in interventions and/or amended complaints-in-intervention filed by respondent DHB and LBP against petitioner VMC are dismissed for lack of jurisdiction.”

VMC’s P1.5-B debt

With this ruling, DHB, which stand for Dao Heng Bank, and LBP have a final recourse in enforcing collection of their money: The Supreme Court.

What the public investors who trade on VMC common shares should have been told is how much Victorias Milling has saved by the conversion of the company’s liabilities to equity. In short, had VMC’s creditors not agreed to swap their loans for common shares, how much would have they been paid in interest?

Anyway the fight between VMC and LBP is still ongoing. It could even reach the high court should creditors choose to strengthen their collection suit.

From VMC’s financial filings, public investors were told that the company was back on track. As of Nov. 30, 2017, it reported retained earnings of P2.804 billion in a consolidated but unaudited financial posting.

In an annual report, Victorias Milling listed 3.042 billion as authorized capital stock that is fully subscribed and paid-up. At the same time, it reported P1.5 billion as “amount of debt outstanding as of Aug. 31, 2017.”

Ownership profile

Victorias Milling belongs to LT Group of Companies. The two capital letters stand for Lucio Tan, who is one of the Philippines’ biggest tycoons.

In annual report as of August 2017, Victorias Milling listed PCD Nominee as a significant stockholder with 782.368 million VMC common shares or 28.53 percent; Premier Network International Ltd., a BVI company, 752.172 million common shares or 27.43 percent; LT Group Inc., 847.367 million common shares or 30.90 percent; and Narra Capital Investment Corp., 566.11 million common shares or 20.65 percent.

BVI stand for British Virgin Islands, which when used in a corporate name means the company is foreign, the reason why Premier Network is classified as “alien” in VMC’s ownership filing.

In an explanatory note, Victorias Milling said LT Group’s holdings included 170.133 million VMC common shares “in Tanduay Holdings Inc.”, which probably refers to Tanduay’s ownership of VMC common shares.

Executive compensation

In the same annual report, Victorias Milling said it had only five executive officers who are the company’s highest paid. These are Eduardo V. Concepcion, president and chief executive officer; Minnie O. Chua, chief operating officer; Teresita V. Ilagan, chief finance officer; Linley A. Retirado, chief manufacturing officer; and Eva A. Vicencio Rodriguez, chief administrative officer.

As a group, Victorias Milling paid them P20.592 million in 2016 and P14.9 million in 2017. For 2018, the company estimated their pay at P17.04 million. In addition, the company paid them bonuses and other compensation of P13.589 million in 2016 and P7.53 million in 2017. This year, VMC said it would pay them P2.84 million.

In addition to VMC’s five highest paid executives, the sugar miller also disclosed consultancy contracts with 12 other individuals but did not disclose their compensation.

With Victorias Milling’s accumulation of retained earnings, why shouldn’t it pay well its executives and hire consultants to maintain the company’s profitability? Just asking.


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