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Extreme Makeover

PhilippineBusiness.com.ph
Volume 12 No. 6 – Industry

Ailing pre-need firms grapple for a workable recovery plan

College Assurance Plan

No. of planholders:

• Total: 780,000
• Open-ended: 594,426 (worth P20.9 billion)
• Still paying CAP: 174,720
• Presently enrolled: 110,000
• Availing in schoolyear 2005–06: 90,000
• Already sent to school: 84,490

Amount needed for tuition coverage in schoolyear 2005–06: P2.46 billion

Potential sources of funds: P15.5 billion in assets, P8.7 billion of which are in a trust fund

Options:

• Fund infusion: Liquidation of assets, asset swaps, increased capitalization, and loan applications in exchange for some trust fund assets.

• White knights: CAP claims an unnamed North American investor offered to infuse about US$100–227 million in 2004 but withdrew upon learning CAP’s license to sell was revoked. Website searches yield nothing about such an entity.

Romeo Roxas, owner of Greensquare Properties Inc. and Green Circle Property Corporation, also expressed interest but withdrew his bid to infuse a P6-billion property in Quezon province in the trust fund in exchange for preferred shares in the pre-need company.

A local bank was also interested in infusing P1 billion in cash in exchange for preferred shares.

Zurich-based investor International Global Capital Holdings planned to generate US$12.5–25.0 million in exchange for preferred shares. An asset safekeeping receipt was issued to secure CAP’s MRT bonds, but to date, no deal has yet been finalized.

• Apply for rehabilitation: Not an option at this stage as CAP’s license to sell was revoked in September 2004.

Latest development: The SEC issued a show-cause order on 27 July giving the company 20 days to produce a viable explanation for its trust deficiency and present an investor that will bail out the company. Failure to comply means a takeover move by SEC.

Pacific Plans

No. of planholders:

• Total: 434,000
• Open-ended: 34,000 (worth P1.3 billion)
• Fixed plans: 400,000 (Pacific Plans assumed the license of now-defunct unit Lifetime Plans)
• Availing in schoolyear 2005–06: 16,000
• Already sent to school: 56,000

Amount needed for tuition coverage in schoolyear 2005–06: P350 million (May–June 2005)

Funds available for distribution: P591 million (P341 million in cash from the company and P250-million loan from a majority shareholder)

However, payment to planholders did not prosper when unit Lifetime Plan’s certificate of incorporation was revoked by the SEC on 25 May.

Options:

• Plan swap: Replace traditional plans with fixed-value plans plus 7% interest per annum excluding charges, to be encashed in July 2010 upon maturity of the Napocor bonds.

• Money-back program: Open a liquidity window for those who cannot wait until 2010. Planholders are paid plan-termination values equivalent to only 50% of total payments made.

• White knight: None, but the company is looking for investors to pump in P500 million in working capital and issue P300 million worth of convertible preferred shares to possible investors.

Latest development: Forged an agreement with an organization of Pacific Plans planholders, to revisit the entitlements of about 5,000 open-ended planholders. Details were to be finalized 15 to 30 days after the agreement, but Pacific Plans says payment is still dependent on available cash.

Source: MBC Research and Information Group

December 1, 2005 - Posted by | Philippine Newspapers/Web News | ,

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