Not so Mighty
The investigation ordered by the Department of Finance on the practices of cigarette manufacturer Mighty Corp.—which fiscal authorities suspected might have deprived the government of as much as P5 billion in excise taxes—is not the firm’s first brush with the law, apparently.
Biz Buzz received word recently that Mighty (the new nemesis of industry giant Philip Morris Fortune Tobacco Corp.) had, in fact, allegedly been accused of and convicted for “acts of unfair competition” in three states in the United States.
According to our source, Mighty’s legal woes in the US stemmed from its nonpayment of fees required of all tobacco firms to be placed in an escrow fund to be used for health purposes (much like the fund set up for victims of industrial asbestos, we’re told).
If fact, judgments have been rendered by the federal states of California, Oregon and Oklahoma over the last decade against Mighty and its codefendants for “acts of unfair competition” and were asked to pay the three states $21.3 (or about P918 million) in “judgments, penalties, fees and postjudgment interest.”
The three US states have been seeking enforcement of judgments rendered against Mighty in their respective jurisdictions while simultaneously barring the Bulacan-based firm from selling their exported cigarettes in these jurisdictions.
One judgment was rendered in Sacramento County, California, in 2006 with total fines of $7.9 million. Three judgments were rendered in Oklahoma County, Oklahoma, from 2003 to 2005 with total fines of $4.1 million, while two judgments were rendered in Marion Country, Oregon, in 2003 with fines of $9.3 million.
Of course, Mighty has no such problems in the Philippines where it continues to reap the benefits from the shift of smokers to lower-priced brands, thanks to the sharp price increases brought by the Sin Tax Reform Law enacted this year.
Whether fiscal authorities will find anything anomalous with the company’s practices, as alleged in the DOF memo is, of course, something we can only guess at this point. Daxim L. Lucas
Gaming alliance
Leisure and Resorts World Corp. has entered into a funding deal with gaming peer DFNN Inc., which, based on industry estimates, may give it a 10-percent equity stake in the latter.
LR agreed to lend P86 million to DFNN with a 36-month tenor at an interest rate of 8.5 percent a year. At LR’s option, it may convert the loan into primary common shares of DFNN at any time beginning on the date of the initial drawdown of the loan and before the expiration of the term of the loan at a conversion price of P4.75 a share. (DFNN’s share price closed 1.55 percent lower at P5.07 yesterday).
“Both are gaming companies and understand the industry and prospects,” DFNN chair Ramon Garcia Jr. told Biz Buzz, adding that the exact amount of equity that LR would get would be determined after DFNN has obtained approval for an increase in authorized capital and the notice of conversion.
But based on the number of shares that LR will get if and when it converts at the pre-agreed strike price, and taking into account dilution from the issuance of new shares, other industry sources estimate a potential equity conversion of 10 percent. Doris C. Dumlao
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