SC affirms rehabilitation of ASB group

MANILA, Philippines - The Supreme Court on Monday upheld the rehabilitation plan of ASB Group of Companies, which filed a petition for rehabilitation before the Securities and Exchange Commission (SEC) in 2000 despite the objections of two of its creditor banks. In a 22-page decision penned by Associate Justice Presbitero Velasco Jr., the SC also ruled that a rehabilitation receiver was to be appointed by the SEC for the ABS Group. Under the rehabilitation plan, the ASB Group proposed to stop payment of interests and surcharges incurred after April 30, 2000. It also proposed a dacion en pago (dation in payment) mode of payment where ASB offers assets to settle outstanding debts. In the same decision, the SC also affirmed the Court of Appeals’ (CA) earlier ruling that the SEC did not commit a grave abuse of discretion when it entertained the ASB’s petition for rehabilitation without previous finding of technical insolvency. The SEC approved ASB’s rehabilitation plan in 2001 despite the objections of the Philippine National Bank (PNB) and the Equitable-PCI Bank. “The mere fact that the ASB Group averred that it has sufficient assets to cover its obligation does not make it ‘solvent’ enough to prevent it from filing a petition for rehabilitation,” the SC said. In the decision, the SC said a firm will only be considered technically insolvent when it foresees the impossibility of meeting its obligations for more than a year even if it may have considerable assets. “Thus at the first instance, a corporation may file a petition for rehabilitation — a remedy provided under Sec. 4.1 [of Rule IV of the Rules of Procedure of Corporate Recovery],” it said. Adopting the earlier findings of the CA, the high court also said SEC’s actions were not arbitrary. The CA previously ruled that the SEC “took into consideration the fact that compared to the creditor banks who have existing mortgages with private respondents, the 725 individually affected unsecured creditors with a much higher stake in their combined claims of P4 billion, the SEC found it prejudicial to disapprove the Rehabilitation Plan and thereby allow the creditor banks to foreclose the mortgages and sell the fixed assets at prices lower than the market value.” The SC likewise upheld the CA’s earlier ruling that the appointment of the interim receiver should be understood as a necessary and urgent step to protect the interests of both creditors and stockholders of the ASB Group to ensure the viability and the success of the rehabilitation proceedings. The court then said the assets and business operations during the pendency of the proceedings should be particularly protected. Citing its earlier decision on the petition of Metrobank, one of ASB Group’s creditor banks, the SC noted that the PNB and Equitable-PCI Bank are not forced to accept the terms of the rehabilitation plan, which were merely “proposals” for the creditors to accept. - GMANews.TV