LT Group shares fall 4% after Duterte chides Lucio Tan over PAL's arrears

Share prices of LT Group Inc., the holding company of business tycoon Lucio Tan, posted a 4-percent decline on Thursday after President Rodrigo Duterte gave Tan a 10-day ultimatum the night before to settle unpaid navigational fees and charges of Philippine Airlines.

The LT Group holds a 49-percent stake in PAL after it reacquired the equity stake in the airline from San Miguel Equity Investments Inc., a subsidiary of San Miguel Corp. SMC, in 2014.

Lucio Tan is the chairman and CEO of both the LT Group and PAL Holdings Inc., the parent of Philippine Airlines Inc.

At the close of trading on Thursday, shares of LT Group were down P0.74 or 4.11  percent at P17.26 per share from P18 on Wednesday. It's market capitalization fell by P8.008 billion to P186.777 billion from the P194.785 billion on Wednesday.

LT Group forms part of the 30-member Philippine Stock Exchange index, and carries an index weight of 1.24 percent.

On Wednesday, Duterte told Tan to settle within 10 days PAL's unpaid airport charges owed to the Civil Aviation Authority and the Manila International Airport Authority or stop operating at the Ninoy Aquino International Airport.

The Department of Transportation estimated the airline supposedly has arrears totaling  P6,965,146,149.63 as of July 31, 2017.

Shares of LT Group declined as a result of recent remarks by the President, Aniceto K. Pangan, equities trader at Diversified Securities Inc., said.

"When a head of the government speaks about particular companies and their problems with the government, that's a big thing. They should revive back their credibility to erase the negative impression of investors on that," he said in a phone interview.

In August 2016, Duterte identified businessman Roberto V. Ongpin as one of the oligarchs embedded in the government and needed to be weeded out.

As a result, Ongpin lost around P7.664 billion from his shareholdings in online gaming technology firm PhilWeb Corp. where he served as chairman and director.

In a separate statement on Wednesday, PAL said it was seeking a compromise deal on its arrears with the government.

"We look forward to meeting the negotiating panel and we are ready to submit a Compromise Agreement to settle this issue once and for all," it said in a statement.

It looks like the situation does not augur well for PAL, Pangan noted.

"It lessens the investors' confidence with regards to the owner when they hear such words from the President and the credibility of the owner is affected," Pangan said.

Moving forward, Pangan said PAL must ensure that shareholders investors of the company are properly informed of the situation.

"They just have to explain clearly what's the status. If it's credible enough then the fundamentals will remain the same," he said. — VDS, GMA News