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Clients open to talks with new PPI owner

By Doris Dumlao, Alcuin Papa
Philippine Daily Inquirer
First Posted 03:10:00 01/22/2009

Filed Under: Insurance, Banking, Company Information, Mergers - Acquisitions - Takeovers

MANILA, Philippines ? Investment Banker Noel Oate, who recently came in as the white knight of troubled Pacific Plans Inc. (PPI), sees a potential turnaround in the pre-need company?s fortunes in two to three years despite the lingering global financial turbulence.

And after airing stiff opposition to Oate?s takeover, the leader of a group of plan holders demanding payment from the company said it was now open to talks with the new PPI owners.

Oate also assured PPI?s about 300,000 holders of education, memorial and pension plans that his team would honor the $47 million or approximately P2.3-billion payout required by a court-approved rehabilitation program.

?The PEP Coalition, which claims to have a membership of 3,000 plan holders, represents less than 1 percent of the total PPI plan holder population. The new PPI management plans to address the concerns of all the plan holders and not just the PEP Coalition,? Oate said in an e-mail to the Philippine Daily Inquirer.

As to the other holders of fixed-value education, memorial and pension plans, Oate said the new PPI would continue servicing all plans in accordance with the terms of the contract as they fall due.

?PPI does not want to go the way of AIG, Lehman Brothers, Legacy and Scholarship Plans,? he said.

AIG had run to the Federal Reserve Bank for a multibillion-bailout package while Lehman Brothers declared bankruptcy in September last year. Recently, various pre-need companies under the Legacy group have ceased operations.

Oate said the new PPI management intended to talk with all concerned plan holders and plan holder groups.

?Of course, PPI cannot give preferential terms to any group of plan holders as this might prejudice others,? he said.

Philip Piccio, president of the PEP Coalition, said his group was open to talks with the new PPI owners ?if there is a good plan to solve our problems.?

Piccio said PEP members numbered around 16,000 with 34,000 beneficiaries-students affected by PPI.

Gina Garcia, an officer of the coalition, said she broke down in tears out of frustration when she heard the news of PPI?s sale.

?Like in 2005, the Yuchengcos are again escaping their responsibilities to their plan holders,? she told the Inquirer.

Vic Ortuoste, head of the PEP Coalition?s finance committee, said the group would seek a temporary restraining order from the courts if need be, to stop the sale.

?If the Yuchengcos think they can get off the hook easily by selling the company, they should think twice,? he said.

PPI?s troubles started in 2005 when the company applied for rehabilitation in the courts, saying it could no longer service its open-ended educational plan holders.

Purchase of this type of educational plan assures the beneficiary-student that his or her tuition would be fully paid by PPI. But the company said the deregulation of tuition resulted in its inability to pay off its plan holders.

Parents band together

Parents who bought the plans banded together and opposed the rehabilitation of PPI, saying the company could not renege on its responsibilities to its plan holders and that it was perfectly capable of paying off its plan holders.

Their opposition to the rehabilitation is still pending in the Supreme Court.

The coalition also filed charges against Rizal Commercial Banking Corp. (RCBC), holder of PPI?s trust fund, for mismanagement of the fund. RCBC is also owned by the Yuchengco family.

In retaliation, the Yuchengcos filed libel charges against the officers of the group, one of which is still pending in a Makati court.

Some of the children who were supposed to be beneficiaries of the plans bought by their parents have stopped schooling.

?Their lives have been disrupted. Other students have transferred. Many of the parents have wavered, but some are holding on for the principle of the thing,? Piccio said.

He admitted that he had to borrow money ?left and right? just to put his daughter through college.

Piccio also lamented that the group was never consulted on the sale of the company. ?It caught us by surprise. They cannot disassociate the plan holders from all of this.?

Ortuoste said PPI and the pre-need industry in general were suffering a malaise that a change of ownership and name cannot cure.

Bonds and stocks

Asked how soon the PPI could make a turnaround, Oate said the bulk of its assets was dollar-denominated bonds issued by National Power Corp. that carried a sovereign guarantee.

?An appreciation of the US dollar against the peso in the next 18 months which is anticipated would be more than sufficient to answer for the liabilities of PPI,? he said.

Despite the US recession, it is widely expected in the international markets that the US dollar would strengthen against major global currencies over the medium term as US firms clean up their balance sheets, liquidate overseas interests and repatriate funds to the world?s largest economy.

Oate recently paid P250 million to buy out PPI lock, stock and barrel from the Yuchengcos. He intends to rename PPI, which carried a stigma arising from its default on open-ended educational claims, ?Abundance Providers and Entrepreneurs Corp.?

US dollar Napocor bonds

He has also committed to bring in more funds if needed by the company. He is confident that the trust assets consisting of US dollar Napocor bonds, are more than sufficient to meet its legal obligations.

?But if in the unlikely event that the trust assets are insufficient, the owners of PPI are willing to provide the necessary fresh funds as required by the rehabilitation court,? he said.

In drawing up the company?s business plan, Oate?s group assumed a medium-term yield of 8-9 percent on its trust funds.

Copyright 2015 Philippine Daily Inquirer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.




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