by Lala Rimando
Apr. 20, 2009
As a showcase of the Securities and Exchange Commission’s resolve to regulate the troubled pre-need industry well, SEC chair Fe Barin told the senate hearing Monday that it had prohibited Prudentialife Plans Inc. from selling new pre-need plans since April 16.
Barin told the Senate Committee on Trade, which is conducting the hearings on the controversial retail financial industry, that Prudentialife failed to present an acceptable proposal to address its capital and trust fund deficiencies.
In September 2008, SEC records showed that Prudentialife has P14.16 billion in “trust funds,” or the current market value of its investments. This amount, however, was more than P5 billion short of the SEC-required P19.5 billion “reserve funds,” or the amount that pre-need companies should be aiming for after they have invested their clients’ money over a period of time.
On February 2, Prudentialife submitted a Multi-year Capital and Trust Fund Build-up plan, which the SEC rejected. The regulator stood its ground even after the company appealed.
In an en banc decision last April 17, the SEC commissioners revoked the company’s 2009 dealers’ license, or its permit to sell new plans.
The company, however, said they would continue to service and honor their obligations to current clients.
Barin said they rejected Prudentialife’s proposal because it did not meet SEC’s requirement.
The acceptable assets to plug the gap between the company’s trust fund and the reserve fund should be, among others, (a) income-generating real estate, and (b) unlisted shares that are not in any way related to the pre-need company.
In a statement, Prudentialife said, “The assets we offered are real estate properties that have good values but are not yet income-generating. Aside from this, we offered unlisted shares of profitable companies but are affiliates of our pre-need company.”
It confirmed that, “The SEC did not accept these assets for contribution to our trust fund and capital.”
Previous lessons from the fall of industry giants, like College Assurance Plan (CAP) and Pacific Plans, in 2005 have led SEC to require that pre-need companies park their clients’ amortization payments only in safe investments.
CAP’s thunderous fall was mainly due to the decisions of the owners, the Sobrepenas, to invest the pre-need plan holders’ money in potentially high-yielding but very risky ventures. These included posh residential condominiums, high-end golf courses, the concession to operate Camp John Hay in Baguio, and the rights to operate the MRT rail company. When the beneficiaries of CAP’s educational plan holders were all set to enrol in school, the company could not come up with the cash to pay the tuition fees since the funds were still trapped in the non-earning ventures.
In the case of the Yuchengco-led Pacific Plans, a good part of the trust funds were invested in bonds issued by the investment arm of Rizal Commercial Banking Corp, which is part of the Yuchengco Group of Companies.
Prudentialife also has investments in real estate, including First Asia Realty Corporation, a part owner of SM Megamall. Its unit, Globe Asiatique, Inc. is a developer of various office, residential, and memorial properties.
The SEC and Prudentialife, however, did not specify which assets were included in the plan.
Prudentialife blamed the global economic crisis and the impact of the controversy surrounding the Legacy Group as culprits behind the pre-need sector’s dilemma.
“The global economic crisis has affected a number of industries worldwide including the Philippine pre-need industry. The trust funds of the industry have not been earning their projected returns,” Prudentialife said in the statement.
According to its website, the company used to realize returns that averaged 16.8 percent in 2006 for the assets it parked in its trust fund. As of June 2008, the yields have plummeted to just 4.87 percent.
“Compounding the problem of the industry is the ongoing investigation of the Legacy fraud case. This has dragged down the confidence in our industry whose image has already been tarnished when major pre-need firms went down years ago,” Prudentialife added.
The Legacy Group has three pre-need companies, which all closed in January. The syndicated estafa cases filed by bank regulator Bangko Sentral ng Pilipinas and state insurer Philippine Deposit Insurance Corporation have traced how the money of its 12 rural bank depositors and the pre-need clients ended up in companies controlled by businessman-turned-politician, Celso de los Angeles, Legacy’s founder.
The pre-need industry was already in the doldrums before Legacy hugged the headlines.
The Philippine Federation of Pre-Need Plan Companies admitted in January that, as of June 30, 2008, the gap between how much its 24 members have and should have set aside to cover future obligations to clients reached a staggering P46.83 billion.
They said this deficit continued to grow in the second half of 2008 as the US-led financial crisis shrank the market values of their investments.
The Federation, which had lobbied hard against stricter regulations and accounting standards in the past, said their members had three options: (a) raise new capital based on the SEC’s multi-year funding scheme, (b) take an “orderly exit” from the industry and paying plan benefits as warranted, or (c) seek corporate rehabilitation.
Prudentialife was one of the two who chose the first option. The other was Cocoplans, Inc. SEC approved the plan forwarded by Cocoplans.
Some of the other 22 existing pre-need companies with trust fund and capital deficiencies have yet to reveal their choice. The deadline for the first option was extended to and eventually expired last April 15.
In the past, the SEC, upon the prodding of the Federation, gave pre-need companies considerable leeway in making up for their trust fund deficiencies.
Under the scrutiny of the media and legislators, the SEC cannot afford to be as lenient as before.
Barin and the other SEC officials disclosed their decision on Prudentialife’s proposal before an audience of lawmakers and pre-need plan holders who have previously castigated the commission for being too soft on Legacy.
It did not help that Legacy owner Celso de los Angeles was a no-show at the senate hearing. The senators had ample time to grill SEC in the hope that the regulator turns out to be as guilty as the fraudsters in Legacy.
In earlier hearings, former SEC commissioner Jesus Martinez was alleged to have facilitated the approval of Legacy Consolidated’s dealers’ license at the time Martinez received “gifts”— a property and a vehicle—from Legacy.
Barin herself was dragged into the picture after it was reported that her husband obtained a sports utility vehicle from a Legacy executive. Senators called for her resignation, but she denied any wrongdoing.
This time, the SEC did not come empty-handed at the senate hearing. For naming Prudentialife and citing their recent decision, SEC seemed bent to show off that it is doing its job and has no sacred cows.
Prudentialife might as well be the sacrifice on the altar. It is one of the industry pioneers and has been around for 31 years. Its founder, Ambassador Francisco A. Alba, was the Philippine envoy to the Vatican from 2001 to 2003. What more, Alba was active in the Federation and has been vocal in issues hounding the industry.
As far as the pre-need industry is concerned, SEC tends to highlight the good rather than humiliate the bad. In February, it made public a list of pre-need companies that have voluntarily increased the portion of clients’ funds they are setting aside for future obligations. Prudentialife was not in that list.
SEC’s current boldness is almost unprecedented. In the past, SEC commissioners tried an iron hand as they started to introduce reforms, but later backed off when they were prevailed upon by industry players.
One commissioner told abs-cbnnews.com/Newsbreak before that they feared that being too rigorous with the reforms might financially choke the pre-need companies, leading to their closures. The commissioners were concerned that more plan holders would end up holding the bag if and when the pre-need companies close shop.
SEC’s decision to tell the world of Prudentialife’s plight is a test of that long-held worry. — with reports from Zen Hernandez, ABS-CBN News
In our post last Feb. 27, 2009, we informed you that the PEP Coalition has moved to rescind the sale of Pacific Plans Inc. to the Onate Group because it is becoming more and more apparent that this move was simply an exit plan by the Yuchengcos.
We sent a follow up letter to SEC Chairperson Barin requesting for an active stance on our case similar to what they are providing Legacy. We have also requested from Sen. Roxas a Senate Hearing on the trustee banks of the preneed companies together with BSP and SEC after the Holy Week and Senate recess. This should provide the venue to look into the violations of the trustee banks in the management of the trusts funds of the preneed planholders and the negligence of BSP and SEC in exercising their regulatory and supervisory mandate.
Below is the letter sent by the PEP Coalition.
WHAT’S happening to our pre-need industry? Formerly a sunrise industry, it is now setting under cloudy skies.
Strictly speaking, the problem is not the making of the pre-need companies. It was the making of the Department of Education (DepEd), when it lifted the 14-percent limit on tuition fee increases.
The pre-need industry operates on the principle of expectation. You pay now to the pre-need company, in installments, what you expect you will need in the future, be it education, memorial, or pension plans. The company invests your money and pays off what you need when you need it. It makes actuarial studies on how much it would need year after year to pay off the plan holders. The study starts from the presumption that tuition fees cannot increase beyond 14 percent.
So what happened when the limit was lifted and tuition fee increases hit the roof? Naturally, the firms didn’t have enough cash to pay the needs of planholders as guaranteed by their plans. Their actuarial studies went haywire. That is why only the traditional education plans (open-ended, meaning the company will pay whatever amount the schools charge) are affected. The memorial and pension plans are not affected at all.
When it began to sell traditional education plans in the mid-1980s, Pacific Plans Inc. (PPI) of the Yuchengco Group appeared to be the savior every parent was waiting for. Imagine, unlike other plans where the value of the benefit is fixed at the time of availment, traditional educational plans undertake to pay the tuition fee of the beneficiary at the time of availment, regardless of cost.
All these went out the window when the DepEd deregulated tuition fee increases, which then skyrocketed to 16 to 28 percent a year.
The Asian financial crisis and now the global financial crisis also took their toll on the investment projections of the pre-need companies.
In the case of PPI, it had chosen to invest in Napocor bonds which are fairly secure. But some of them are still locked up in dollar deposits that would not mature until next year.
The planholders naturally want PPI to fulfill its obligations now. A group called the Parents Enabling Parents (PEP) Coalition filed charges against PPI, claiming that planholders have been robbed of their hard-earned money and that the rehabilitation plan was just a sham proceeding to cover up PPI’s obligations.
The Yuchengcos finally threw in the towel and sold PPI—to Noel Cariño, the wonder boy of Asian Spirit. But what happened to PPI is also happening to other pre-need companies.
It is in this respect that the condition of the pre-need companies in distress may be differentiated. As already stated, PPI’s assets are invested in safe Napocor bonds and dollar deposits, and under the court-approved rehabilitation plan, holders of traditional education plans will get dollar-denominated entitlements in 2010.
College Assurance Plan, on the other hand, is differently situated as its trust assets were placed in a mix of investments including equities and real estate projects which have not done well. Legacy Consolidated Plans of Celso de los Angeles is something else. It is a scam, according to the Bangko Sentral ng Pilipinas (BSP), which has filed charges against De los Angeles and other officers of the Legacy Group. Legacy claims that its trust funds are intact, but the BSP says Legacy is operating what is like a pyramid scam—paying claimants with money collected from new planholders. When collections from new plans diminish, the whole operation collapses.
What the whole mess reveals, however, is that the Securities and Exchange Commission (SEC), which supervises pre-need companies, was woefully remiss in its duty. It did not monitor the pre-need companies closely, and therefore failed to institute measures to prevent their collapse. It is only now that the SEC has woken up, after the pre-need mess collapsed on our heads. The SEC’s job is preventive, not punitive or remedial as it is doing now, so that planholders and investors do not lose their investments.
The SEC recently came out with rules requiring pre-need companies to adopt capital build-up plans—but it was too late. Members of the Federation of Pre-Need Companies (FPNC) said they would comply but will require more time to do so. In the event that a company is unable to increase capital, the SEC will not renew its license to sell additional plans. If this happens, the company will sink into a deeper hole.
The only other recourse is for a company to rehabilitate and/or liquidate. In the event of liquidation, the question is whether or not the company has enough assets to cover its trust obligations.
Important, therefore, is where trust assets are invested. Considering how the global financial markets are right now, the most prudent place to invest funds would be government-issued bonds or securities as these enjoy sovereign guarantees.
Capital build-up is of course the preferred course of action by planholders. They would like the owners to plow in more capital to at least cover the deficiencies expected from the low return from their investments so that they may continue to service planholders.
But why would anyone want to put in good money after bad? Any additional investments would make sense only if there is hope for recovery.
During liquidation, planholders will have to share in what is available of the trust funds. The courts will have to distribute the same as equitably and fairly as possible. That is why some planholders would rather go with previously approved rehabilitation plans and look forward to getting their money, plus interest, rather than wait for something that may not come at all.
What is the lesson in all these? Government regulatory agencies, like the SEC, should do their jobs well.
The letters recently sent by Pacific Plans to its traditional planholders confirm the worst fears and suspicions of many members in the Coalition — that Onate is only willing to honor what is in the modified rehabilitation plan and nothing more and that this move was merely an exit plan by YGC. The original rehab plan as well as the modified rehab plan were both rejected by the PEP Coalition because it is our contention that Pacific Plans always had the money but was merely made to appear as though it could no longer pay its planholders.
Therefore, the PEP Coalition is taking the necessary steps now to rescind the sale. Below is the announcement by Winnie Bonifacio (Core Member) as well as the letter to the SEC from the PEP Coalition.
Attached is the letter we sent to SEC re PPI sale to Onate. Our lawyers are now preparing the necessary documents to move to rescind the sale. The sale is an obvious exit plan to protect YGC from meeting its contractual obligations to us when we win the SC case. Onate can simply file for bankruptcy and say his group does not have the funds to pay us per our plan. We will be in a better position if PPI remains within the YGC corporate fold which is awash with cash. RCBC is buying banks left and right while parents and their families continue to languish!!!
Note that the SC has already requested for the filing of the Final memorandum from the lawyers which is PREPARATORY TO MAKING A DECISON ON THE CASE. Pray they decide soon.
We will have a new office up and running by next week in Makati. We will post the address and number soon. Applications can be processed and updated too. Gilbert will be our man Friday in the office.
Winnie M. Bonifacio
Instead, our congressmen are laboring to change the Constitution.
On Feb. 15 last year, about 10,000 farmers, students, professionals and workers were on the streets of Makati asking the President to step down.
The issue was the alleged big kickback behind the Philippine National Broadband Network (NBN-ZTE) project where the whistle-blower was “kidnapped” and his life threatened.
President Macapagal-Arroyo and her husband were among those allegedly involved in the NBN-ZTE project worth $329.5 million or P16.5 billion.
Gloria is perceived by many to have cheated massively in the 2004 elections and, therefore, an illegitimate president amid the worsening series of corruption charges.
Last week’s Senate hearings were focused on World Bank (WB) reports implicating high-ranking officials including the President’s husband in the reported corruption in WB-funded projects.
A recent survey revealed that this administration is the most corrupt in the nation’s history.
Many are waiting for the 2010 presidential elections as a constitutional deadline to end Gloria’s illegitimate tenure.
However, there are signs that Gloria wants to remain in power after 2010.
Last Friday, the Speaker of the House together with the majority of Congressmen sponsored House Resolution 737: Resolution Proposing Amendments to Sections 2 and 3, Article XII of the Constitution to Allow the Acquisition by Foreign Corporations and Associations, and the Transfer or Conveyance Thereto, of Alienable Public Lands and Private Lands seeking to allow foreign entities to own lands not exceeding 25 hectares, and to explore and develop the natural resources through joint venture or production sharing arrangement.
Purportedly, this is to attract foreign investment.
I am strongly against this move now because once the resolution is on the floor, the whole Constitution will be opened to amendments.
There is no limit to possible amendments, including extending the term of office of elected officials, granting the President permanent immunity from prosecution, or even changing the form of government to parliamentary for Gloria to stay in power.
Recently, I started sending text messages to some Congressmen including House Speaker Prospero Nograles explaining my dismay. “Why is it important to you now to amend the Constitution? Why now? Can’t it wait after 2010 presidential elections?”
Nograles answered and invited me to join the public hearing. So I told him that I am currently studying at the KSG Harvard but still continuing to be involved in our nation’s affairs.
I pointed out to him that one of the pressing issues is the agony of pre-need victims. He is also a victim of the Legacy Group according to newspaper reports.
Like Legacy, other defunct pre-need companies collected money from parents or retirees with the promise to pay future college tuition fees of their children or retirement benefits. But it declared bankruptcy when the contractual benefits started to be paid.
His next reply was they are studying it. Still studying it? Better to act now!
It is urgent to study the collapse of more than 50 pre-need companies in the last seven years; the original pre-need bill which was filed in 2003, intermittently discussed in Congress and lost its essence because of strong lobby of the industry federation; neglect of Securities and Exchange Commission (SEC) in establishing rules and regulations that could have prevented the collapse of pre-need companies; mismanagement of pre-need trust funds; wrong practices of accountants and pre-need actuaries and irresponsible and unprofessional management.
Unsound pre-need firms
Had Congress timely acted on these, unsound pre-need companies would have been closed and would not have victimized more parents or retirees who lost hard-earned life savings for the college education of their children and retirement.
Nograles gave comforting assurance that Congress will return the money of pre-need victims.
I retorted: “Where are you going to get the money? Are you aware that the biggest company, CAP, has a fund deficiency of more than P15 billion in 2005? How much would it be if Pacific Plan, Legacy and 50 more closed pre-need companies are included? Where will you get more than 10 percent of our GDP to just return the money entrusted by the victims to pre-need companies? Not from our budget, which is still in deficit despite selling of government assets?”
Please, Congress, drop the Constitutional change for the meantime.
Focus now on crafting a really good pre-need law. See how pre-need victims can be compensated equitably; and punish the culprits.
Give hope to our future!
(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a former insurance commissioner and SEC volunteer-actuary. Feedback at email@example.com. For previous articles, please visit .)
The Philippine Star
By Zinnia De La Peña
Updated February 16, 2009 12:00 AM
MANILA, Philippines – Cash-strapped pre-need firm Pryce Plans Inc. has opted to fulfill its obligation to plan holders by paying them in kind – specifically, through medicines, cooking gas and memorial lots.
Pryce Plans Inc. is hardly able to pay its obligations to plan holders in cash because its trust fund is illiquid, according to the Securities and Exchange Commission (SEC).
Based on data obtained from SEC, Pryce Plans Inc. has a trust deficiency of P56.17 million.
Reports submitted by Pryce Plans’ trustee banks to the SEC showed that the ailing pre-need company had reserves of only P113.23 million, short of the required 20 percent reserve of P168.4 million. These reserves comprised investments in the stock market and cash amounting to only P106,839 which is just 0.01 percent of the firm’s total trust fund.
As of end-December 2008, Pryce Plans had a total trust fund equity of P845 million, P591 million of which is for educational plans while P256 million is for pension plans.
The payment-in-kind scheme includes cooking gas from a sister company Pryce Gases Inc., medicine from another sister company and memorial lots.
Pryce Plans blamed the non-renewal by the SEC of its license to sell pre-need plans and the negative publicity involving the collapse of two of the industry’s major players – College Assurance Plans and Pacific Plans, for the deterioration in its cashflow generation.
As of end last year, Pryce Plans had assets of P1.28 billion as against total liabilities of P974.56 million. From P1.87 billion in 2004, its assets have been depleted by 31.7 percent.
Aside from Pryce Plans, three more pre-need firms are believed to be on the brink of collapse due to a funding shortfall.
The Federation of Pre-Need Plan Companies has asked the SEC to relax its capital and trust fund build-up requirements to ensure its survival amid a deepening global financial turmoil.
For this year, the SEC has licensed 24 pre-need companies, namely Ama Plans, Ayala Plans, Caritas Financial, Citiplans, Cocoplans, Danvil Plans, Destiny Financial Plans, Eternal Plans, First Country Plans, First Union Plans, Greyline Plans, and Himlayang Pilipino Plans, Loyola Plans Consolidated, Manulife, Mercantile, Paz Memorial Service, Permanent Plans, Philam Plans, Provident Plans International, Prudential Plans, St. Peter Life Plans, Sunlife Financial Plans, Transnational Plans, and Trusteeship Plans. –
The PEP Coalition wishes to clarify certain concepts which may not be clear to the public or to Mr. Neal Cruz, as gleaned from this column:
1. Open-ended plans were designed and marketed to us with a promise to cover tuition WHATEVER THE COST. This was the promise of PPI to us. This is all we are asking, not a centavo more (click here to see copy of PPI’s letter to planholders with this assurance).
2. School fees have 2 components: tuition and miscellaneous fees. PPI’s open-ended plans only cover TUITION. Yet, when articles talk about escalating fees,almost always it includes the miscellaneous fees component in presenting the magnitude of increase. The tuition component, if you study it separately, did not increase significantly and were well within the expected increases actuarially computed by PPI. We have the actuarial graphs of PPI which we had mapped vs the average TUITION increases.
2. The deregulation of tuition fees was precisely the “bait” dangled before many of us to buy more open-ended plans to hedge vs escalating tuition fees. Therefore, PPI should not use escalating tuition as an excuse now not to pay us.
3. “…collected more than what they had paid” gives the impression we bought plans for investment purposes. We bought these plans based on promises that tuition, regardless of cost, will be paid. We banked on that promise, backed by the Yuchengco name. Whatever any of us got from PPI was the actual tuition that PPI was really promising to pay in the first place based on our contracts, not a cent more.
In the end, all we can say is that PEP Coalition planholders have always fought for what was promised to us CONTRACTUALLY. We are not asking for an X percentage of return on investment. We are not investors; we are planholders who just expect tuition to be paid NO MATTER WHAT THE COST.
That was what was promised, that was what was on our contracts, that is what is owed us.
Mr. Neal Cruz’s column follows below:
Pathetic – Arroyo Chasing after Obama
As I See It
Planholders of the defunct Pacific Plan, Inc. (PPI) who are members of PEP Coalition are protesting the sale of PPI. Alfonso Yuchengco had dumped the ailing PPI on the lap of erstwhile Air Spirit owner Noel Onate to escape his liabilities. Onate, in a meeting with planholders, assured them that his company, Abundance Providers Investment Inc. (APIC), would honor all the commitments to all the planholders. They would not lose anything. He even offered to return all the payments made by planholders, plus interest, to those who wanted them.
But first, what happened to Yuchengco’s original PPI that it was unable to pay the school fees of the traditional educational planholders?
Pre-need companies are like insurance companies. They accept early payments for future needs. The companies guarantee that you get what you need when you need it. They compute what they would need to pay in the future through actuarial studies.
All went well while there was a law limiting tuition fee increases to 20 percent. But when the government lifted the limits and tuition fees rose sky-high, everything went haywire. The actuarial computations were no longer correct and the pre-need companies ran out of money to pay the claims. According to PPI, they have enough assets but part of them were locked up in dollar trust funds that would mature in 2010. They would be able to pay all the claims in 2010.
That’s not good enough for the PEP Coalition. Members want their claims paid now as their plans guaranteed. The coalition castigated the Yuchengco group for non-compliance with its obligations to traditional education planholders, or those to whom PPI obliged itself to pay the value of tuition fees of their beneficiaries at the time of availment, regardless of cost. It said it would question in court the sale of PPI to APIC.
Documents show, however, that some PEP Coalition members have already collected more than what they had paid. Let’s take the case of one planholder, a high-ranking officer of PEP but who shall remain nameless, as an example.
This mother of three children purchased nine different traditional plans from PPI for her children, three each for elementary, high school and college. She paid premiums in the total amount of P397,800 for the nine plans. However, she already received availments totaling a whopping P1,201,171.81, including full tuition fees for her children’s elementary, high school and tuition support for college. In addition, she is also entitled to $10,161.04 in 2010 pursuant to PPI’s Modified Rehabilitation Plan.
In short, she has already received P1,201,171.80 and is entitled to $10,161.04 (that’s in US dollars, whose exchange rate with the Philippine peso is expected to rise) for paying just P397,800. The payments she received are already 301.95 percent of her premiums, or a 16.78 percent annual return since her purchase of the plans in 1990. This is four times higher than any bank interest and is even larger than any investment instrument in the country. What is more, she would receive an additional amount in US dollars in 2010. Assuming that it is converted at P47.50 to $1, the $10,161.04 that she will receive amounts to P482,549.40.
Feb. 7, 2009
MANILA, Philippines –
The Securities and Exchange Commission (SEC) has cautioned the new owner of pre-need firm Pacific Plans against treating victims of the old management as “second-class citizens.”SEC chairwoman Fe Barin said Noel Oñate’s Abundance Providers Investments Corp. should give the victims the same treatment as his firm’s new customers.
He (Oñate) should not give the victims who accepted his offer lesser rights than the new customers, she said in an interview on dzXL radio.
Oñate’s firm earlier offered victims of the old Pacific Plans pre-need mess a buy-back offer that included a 15-percent yearly interest.
The Parents Enabling Parents Coalition said its members are still studying the offer.
“If there are any offers from him it is up to the plan holders to accept that,” Barin said.
Meanwhile, Barin said they continue to monitor the trust funds of other troubled pre-need firms and make sure they rehabilitate properly.
She also said they want to make sure the firms set up trust funds to pay the victimized plan holders. – GMANews.TV
Written by Omerta / Butch del Castillo
Friday, 06 February 2009 02:23
The Yuchengco family has supposedly sold its problematic preneed company, Pacific Plans Inc. (PPI), to a little-known businessman named Noel C. Onate for P250 million.
Somehow, I sense something fishy about the whole thing. First of all, why would any businessman—unless he is goofy—pay P250 million for a company that owes billions in settlements to more than 35,000 education-plan holders?
Even the timing of the so-called buyout makes the deal strange and mysterious.
Right now, the entire preneed industry is in the doldrums and seems to be in the twilight of its existence. The federation of preneed companies has already yelled for government help in the face of a ballooning deficit in its collective trust fund caused by an unprecedented slump in interest earnings.
Not only that, the industry has been suffering nose-diving sales. The collapse of several big-time preneed companies (among them College Assurance Plan, Platinum Plans, Pacific Plans, The Professional group and, lately, the Legacy group) has left millions of irate plan holders unpaid and in a lynching mood. Consumer confidence in preneed products has been greatly shaken, if not altogether shattered. (The federation’s confession that it has a huge trust-fund deficit, by the way, can only deepen public distrust in preneed products.)
Against this grim industry backdrop, the question is, what emboldened Noel Onate to venture into the preneed business anyway, despite all the odds? Simply put, what’s in it for him? I’ve been seeking answers to these questions because the whole thing just doesn’t make sense.
According to a source who was privy to the deal, the Yuchengcos unloaded Pacific Plans on the advice of a prominent lawyer. The main objective was to provide Pacific Plan’s unpaid plan holders a new “target” in their quest for damages and restitution.
In short, the Yuchengcos wanted to “buy” peace of mind. Apparently, they assumed that by divesting from PPI, the irate plan holders would be training their guns on the new owners. The Yuchengcos are figuratively black and blue, and have grown quite weary from all kinds of flak they’ve been getting ever since Pacific Plans defaulted on its obligations to its plan holders about three years ago.
The once-revered Yuchengco name was dragged through the mud even as that family sought a moratorium on payments under a rehabilitation plan.
But, as it turned out, the “strategic” move was ill-advised. It only compounded their headache. The “victims” of Pacific Plans were not to be so easily sidetracked.
When the announcement of the sale came, the Parents Enabling Parents (PEP) Coalition, headed by Philip Piccio, was furious. Here was unmistakable proof, Piccio said, that the Yuchengcos were trying to slip away from their obligation to settle the claims of PPI’s 35,000 plan holders.
Piccio announced that the PEP Coalition would file a slew of large-scale estafa cases against Alfonso Yuchengco (patriarch of the Yuchengco group) and Helen Yuchengco-Dee starting next week in different provinces all over the country where its aggrieved members reside. The sale of the company—if there was an actual sale and not a simulated one—would not absolve the Yuchengcos from their liability. In fact, the deal only bolsters the parents’ claim of bad faith on the part of the Yuchengcos, that they intend to turn their backs on their contractual commitments to the plan holders.
PEP Coalition members have expressed the suspicion that the sale to Onate’s group (Abundance Providers and Investments) is merely a simulated transfer of the ownership of Pacific Plans. On paper, however, it is a done deal between GPL Holdings (represented by Samuel V. Torres) and Abundance Providers. No document detailing the assets and liabilities of Pacific Plans has so far been made public. Only the copy of the deed of sale has been made available.
But assuming, without granting, that Onate has stepped into the picture only to serve as “foil” for the Yuchengcos, it would make more sense if the P250-million payment was made to Onate, instead of the other way around.
To the PEP Coalition—which said it was giving Onate’s group the benefit of the doubt—Onate simply doesn’t come across as a businessman with enough assets to make good on the company’s total liabilities. That is why it won’t ever let go of the Yuchengcos in its quest for justice.
Feb. 5, 2009
Planholders of Pacific Plans Inc. (PPI) warmly received the business plan and action plans presented by new owner Noel Onate, pointing out that it places them in better footing than planholders of other pre-need firms that have folded up.
“We are happy to have heard from Mr. Onate that he intends to comply with the company’s obligations and he presented a good strategy for the company’s turnaround under his 10 point plan,” said Dave Diwa, chairman of Coordinating Alliance for Reform and Empowerment in the Pre-need Industry or CARE.
Diwa said Onate’s offer of a buyback is welcome and he is glad that this will help planholder recover their investments. “This is definitely better than what’s happening with Legacy since this is a commitment to pay back planholders,” he said.
CARE is a group composed mainly of small planholders and supports the firm’s rehabilitation plan. He said he is glad that Onate has committed to comply with his obligations under the rehabilitation plan.
“We are pinning our hopes on Mr. Onate. We saw the light at the end of the tunnel because of him,” said planholder Luz de Leon who noted Onate’s “sincerity and passion to uplift the planholders.”
She said they now have peace of mind because of the assurances of Onate and after seeing his vision for the company as contained in his 10 point plan.
Meanwhile, Securities and Exchange Commission chairperson Fe Barin said the commission will not stand in the way of Onate’s offer to buy back the plans with interest since the sale contract is between PPI and the planholders.
“As long as it does not place the planholders in a lesser situation than before the sale. Its up to the planholders to accept the offer,” she said in a radio interview yesterday.