Philippine Deposit Insurance Corp. has received the regulator’s approval to proceed with the liquidation of the assets of Export and Industry Bank after efforts to rehabilitate the bank had failed.
“The order [to proceed with the liquidation] was issued after the [Bangko Sentral ng Pilipinas’] Monetary Board received a report from the PDIC about the non-satisfaction of the conditions for the rehabilitation of EIB,” the state-owned deposit insurer said in a statement Tuesday.
After learning of the Monetary Board’s directive, PDIC said it would file a petition for assistance from a liquidation court to facilitate the process.
PDIC had twice attempted to sell EIB to a potential white knight. Both attempts failed.
A sale would have prevented PDIC from paying deposit insurance claims. Also, creditors and uninsured depositors of the bank could have reduced their losses.
The original bidding set on Oct. 18 last year failed because none of the pre-qualified bidders appeared. A second sale was set on March 20. But it was likewise declared a failure because no one submitted letters of intent to participate in the bid.
Several issues appeared to have hampered the sale of the bank. For one, PDIC said, only 56 percent of uninsured depositors and creditors gave their consent to the sale of the bank. EIB’s shareholders had wanted the approval of all creditors and uninsured depositors.
PDIC vice president Cristina Orbeta earlier said forums were held in various places to explain to uninsured depositors and creditor the benefits of selling the bank to a potential investor.
Nonetheless, she said, some uninsured depositors and creditors would not give their consent because they wanted to first make sure that the sale of the bank to an investor would mean 100-percent recovery of their money.
Orbeta explained to them that the amount they would recover would depend on the winning bid.
Under the bidding rules, potential investors would compete by stating the amount of EIB’s liabilities—including debts and uninsured deposits—that they would be willing to absorb, and the amount they were willing to shell out to pay for the bank’s assets. The assets include 50 branches all over the country.
Orbeta said PDIC had explained to the bank’s creditors and uninsured depositors that they would be better off if the bank were to be rehabilitated.
This is because the net realizable value of EIB’s recorded assets was estimated at P13.65 billion, PDIC said. This is P11.02 billion short of covering the bank’s liabilities amounting to P24.67 billion.
Under liquidation rules, the amount creditors and uninsured depositors would recover would depend on the amount to be raised from the sale of the closed bank’s assets.
Another issue that confronted the rehabilitation of EIB was the complaint filed by certain parties that have claims against the bank’s subsidiary, E-Securities. The complainants said E-Securities have unpaid obligations resulting from the sale of some securities. But the legal counsel of EIB said the bank already got a favorable ruling from the Supreme Court, which said that EIB need not shoulder the obligations of its subsidiary.