Metrobank jumps gun on Lehman creditors
Seeks court rehab for bankrupt firm’s SPV units
By Daxim Lucas
Philippine Daily Inquirer
First Posted 01:01:00 09/23/2008
Filed Under: Banking, Company Information
The Philippines’ biggest bank jumped the gun Monday on its local competitors as it joined the worldwide rush to secure exposures and grab remnants of collapsed investment banking icon Lehman Brothers.
In a hastily called press conference, officials of Metropolitan Bank & Trust Co. announced that they had asked the court to place local Lehman Brothers units under a “creditor-led rehabilitation” program.
“Metrobank has taken legal action against the two Lehman Brothers subsidiaries,” executive vice president Vicente R. Cuna told reporters, explaining that the move was meant to secure Metrobank’s P2.4-billion loan to the Lehman units.
The petition—which was filed Monday with the Makati Regional Trial Court—effectively gives the claims of Metrobank seniority over other creditors and stakeholders of the 158 year-old US investment bank, who are also expected to start moving to secure their interests worldwide.
Metrobank identified the Lehman Brothers units as Philippine Investment One Inc. and Philippine Investment Two Inc., which the bank identified as “subsidiaries of Singaporean company Lehman Brothers South East Asia Pte. Ltd.”
Metrobank’s legal filing strengthens its hand in gaining control of the two firms’ assets—mostly bad loans and foreclosed assets—in the event that they are unable to continue paying their loans.
Cuna said, however, that both firms “continue to operate profitably” and were “solvent,” adding that the petitions were filed to ensure the continued normal operations of the companies and defer all claims, actions, and proceedings against them.
“This creditor-led rehabilitation is a preemptive move to protect the bank against possible dissipation of assets by foreign claimants,” he said, adding that Metrobank’s loans to the two firms remained current.
Cuna said Metrobank was the first creditor to initiate legal moves against the Lehman units, which have also outstanding loans from another local bank which he did not identify.
The Lehman firms are so-called “special purpose vehicles” that hold bad loans and foreclosed real estate assets that Lehman Brothers bought from local financial institutions at a steep discount for eventual resale at a profit.
Between 2006 and 2007, the Lehman units acquired bad assets from Development Bank of the Philippines at a discount to their P9.95 billion face value, and another discounted set of bad assets from United Coconut Planters Bank with a face value of P8.68 billion. The acquisitions were partly funded by a P2.4-billion loan from Metrobank.
Both SPVs are also involved in a legal dispute with restaurateur Victor Villavicencio, who claimed that the firms acquired his foreclosed properties in violation of the Constitutional prohibition against foreign ownership of land.
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