Court orders liquidation of Steel Corporation to pay off creditors
MANILA, Philippines — The Regional Trial Court of Batangas City has ordered the liquidation of Steel Corporation of the Philippines (SCP) on grounds that rehabilitation is no longer a feasible option.
The order to convert the rehabilitation of the steel producer into liquidation proceedings was issued by the RTC on Sept. 19. For creditor banks like Planters Bank, Chinabank, Land Bank of the Philippines, Banco de Oro and DEG (Deutsche Investitions-und Entwicklungsgesellschaft), this means that whatever is left from the company’s assets will be used to offset some of their receivables.
The RTC has ruled out rehabilitation on grounds that SCP now appears to be insolvent, a situation where liabilities exceed assets. The court also noted that:
* The continued operations of SCP is threatened by non-payment of its customs duties and other taxes; and
* The actual result of business operations and financial condition of SCP cannot support the amortization schedule of the restructured debts in the approved rehabilitation plan.
In addition, the order noted that SCP had not complied with the provisions of the approved rehab plan and with the orders of the rehabilitation court. It had also failed to achieve the desired targets and goals set forth in the approved rehab plan, the order said.
A liquidation order was issued declaring SCP as insolvent and dissolved, ordering the sheriff of the RTC in Batangas City to take possession and control of all the properties of the debtor, except those that may be exempt from execution.
The court ordered: directing payments of any claims and conveyance of any property due debtor SCP to the liquidator; prohibiting payments and transfer of any property by SCP; directing all creditors to file their claims with the liquidator within the period set by the rules of procedure; and, authorizing the payment of administrative expenses as they become due.
Accordingly, the Sheriffs have implemented the court order and taken possession of the company’s assets.
SCP started having financial difficulties and failed to meet its financial obligations in 2000. At the request of SCP, the banks restructured its loans in December 2002 under an Omnibus Agreement. However, SCP still failed to comply and in June 2006 defaulted on its principal payments, thus prompting the banks to file a creditor-led rehabilitation plan in September 2006.
The court-approved rehab plan required also SCP’s continued payments to creditors, which the company did not comply with.
