Steel firm seeks reconsideration of rehab case termination

MANILA, Philippines - Embattled Steel Corp. of the Philippines has asked the Court of Appeals to reconsider the termination of the company’s rehabilitation proceedings, saying stockholders and creditors agree that it should not fold. In a 40-page motion for reconsideration, the firm said the 12th division’s ruling on July 3 is a "clear abdication" of its duty to settle controversies. "The parties may not agree on many things, but it is undisputed that it is proper and in everyone’s interest to rehabilitate Steel Corp. All parties agree that Steel Corp. can be rehabilitated. The only question, therefore, is how," Steel Corp. said. Terminating the rehabilitation proceedings is like killing its operations, it added. In 2006, Equitable PCI Bank (EPCI), the firm’s major creditor, initiated a rehabilitation plan before a Batangas trial court so the company could restructure its debt and convert a big portion of it into equity. The plan would have allowed the creditors to own 90% of the steel firm. The bank has since merged with Sy-led Banco de Oro, and the surviving entity is now called Banco de Oro Unibank. Steel Corp. started bleeding financially when it put up a plant in Balayan, Batangas in 1996. The project cost ballooned by as much as P3.3 billion following the 1997 Asian currency crisis. Steel Corp. failed to fully enjoy the grace periods on its loans as the amortizations started on the same year the project became operational. The sharp devaluation of the peso against the dollar resulted in foreign exchange losses 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. The firm did not file an opposition to the petition for rehabilitation, but it submitted a counterplan that sought a huge cut on its loans. It also accused its creditors of trying to usurp its assets. The court-appointed receiver decided both plans were not feasible and recommended his own. After several hearings, the trial court recommended an additional equity of P2.67 billion from present stockholders. A debt-to-equity conversion, which would allow creditors to own two-thirds of the company, was also proposed as an alternative. The parties were not swayed, leading them to elevate their separate petitions to the appellate court, whose two divisions separately heard the cases. In fact, the 11th division, where Steel Corp. appealed, merely restrained the trial court from implementing the rehabilitation blueprint. This contradicted the 12th division’s order to terminate the proceedings. The court doubted the rehabilitation plan, noting that the rehabilitation suit had been unduly prolonged and the plan had not been implemented at all. The firm denied this, claiming that it had jump started the rehabilitation outside the one approved by the trial court. It noted that to date, it has date paid loan interests worth P86 million. Steel Corp. said the least the appellate court could have done was consolidate the cases and decide on their merits. — Ira P. Pedrasa, BusinessWorld