Biz Buzz: Garnished

Apart from the Disbursement Acceleration Program (DAP)—parts of which were struck down by the Supreme Court—President Aquino’s fiscal and energy managers have another ax to grind with the judiciary, this time on the revenue generation side and one that particularly throws the power industry in a frenzy.

An emergency meeting was recently convened by the departments of energy and of finance with private sector power generation administrators and distributors after they received a notice of garnishment from the sheriff of the Regional Trial Court (RTC) of Quezon City.

This was in line with the high tribunal’s order to the state-owned National Power Corp. and its successor entity, Power Sector Assets and Liabilities Management Corp. (PSALM), to pay back wages to all employees terminated when the power utility was reorganized in 2003 (in compliance with the Electric Power Industry Reform Act). This decision, circa 2008, was recently upheld with finality and the prescribed settlement on severance pay and back wages had ballooned to P61 billion from P34.7 billion when the original ruling was issued.

The sheriff has now ordered the power industry to disclose all credits payable to Napocor/PSALM. For the private sector contractors, the fiscal impact is neutral as it was just the same amount to be paid to another entity. But for the government, it’s a P61-billion reduction in its cookie jar.

It looks like the executive isn’t ready to throw in the towel yet and a “coordinated” response to the garnishment order is under review. In the meantime, the private sector awaits the tug-of-war between their regulators and the courts. Doris C. Dumlao

Capital market overhang

Don’t look now, but the strict interpretation by the Bureau of Internal Revenue (BIR) of the so-called “alphalist” regulation is giving some very big companies trouble at the capital markets.

Take Globe Telecom, for example. The Ayala-controlled telco recently raised P10 billion through a sale of preferred shares, which will be listed on Friday. Normally, preferred shares sell like hot cake. But Biz Buzz learned that, of the shares allocated to the Philippine Stock Exchange, only 47 percent were taken up. The rest had to revert to the underwriters who had to use their own financial muscle or network of clients to make sure the quasi-equity issue would be sold.

Then there was last week’s bond issue of real estate developer Century Properties Group. Considering that the issue was worth only P3 billion, selling the debt instrument should have been a breeze. But once more, underwriters had to work doubly hard to make sure that the bonds were sold. To make sure the issue was fully sold, bankers had to offer a premium for the bonds. The firm will now have to pay between 159 basis points and 178 basis points higher than comparable issues.

SM Prime is also set to raise P25 billion in bonds to take advantage of the low interest rate regime. One underwriter was confident that they’d have no problem with enticing investors, but added: “We’ll just have to work harder.” Daxim L. Lucas

BDO’s new CIO

Following the early retirement of veteran fund manager Marvin Fausto, the country’s biggest bank Banco de Oro Unibank has found a suitable new chief investment officer (CIO). Frederic “Fritz” Ocampo, CIO for fixed income and equities at Deutsche Bank’s asset and wealth management group in the Philippines, is set to join the SM group’s banking arm effective Sept. 1.

Ocampo had worked under Fausto at Citytrust Banking Corp. early in his career. He joined Deutsche Bank in 1997. Outside of his fund management duties, he served as president of the Fund Managers Association of the Philippines from 2005 to 2007 and as an assistant professor at the De La Salle University’s Graduate School of Business from 2003-2011.

He has a BS degree in Economics (honors) from the University of the Philippines and a Masters of Science in Agricultural Economics from the Pennsylvania State University.

Ocampo was named the “Philippines’ CIO of the Year” in 2011 by Asia Asset Management Magazine and “Fund Manager of the Year for Long-term Fixed Income Funds” by The Asset Magazine in the same year. He was voted “One of the Most Astute Local Currency Bond Traders” by The Asset Magazine for 2008, 2010 and 2011. Doris C. Dumlao

Mine reopening

Nickel mining firm Marcventures Holdings has cleared one obstacle to meeting its 3 million wet metric ton (WMT) in authorized ore production volume this 2014 after the Mines and Geosciences Bureau (MGB) lifted the suspension order on the Cantilan portion of the contract area in Surigao del Sur of its flagship subsidiary Marcventures Mining and Development Corp. (MMDC).

We heard that the suspension order on the Carrascal portion is still under review by the MGB but the mining firm has submitted all the requirements to similarly have the suspension order there lifted.

The group has about 54 million tons of mineral reserves—referring to resources known to be economically feasible for extraction, three times the original estimate based on actual production in 2013 and the quality of ore mined in addition to the results of continued in-field drilling.

From what we hear, about 2.5 million WMT can be mined by Marcventures out of Cantilan alone, which can easily reach 3 million WMT once Carrascal is allowed to resume operations. Doris C. Dumlao

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