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Bleeding in Debt
Written by Lala Rimando
Monday, 22 July 2002
After the Villars’ enviable success in low-cost housing, their companies are now having trouble with creditors.
WHAT A CONTRAST—SPOUSES SEN. MANUEL VILLAR and Las Piñas Rep. Cynthia Villar topped the list of richest legislators in the Senate and the House, but companies associated with them are bleeding in debt.
In their combined Statement of Assets and Liabilities as of yearend 2001, the Villars have declared assets amounting to P405.5 million, of which P401 million is contributed by investments in stocks and properties. Comparing this with their SAL less than six months earlier when their assets were worth P331.5 million, it means that their investments grew by about P74 million, 22.3 percent.
Of the five companies stated in their SAL, Fine Properties is the majority owner of the beleaguered low-cost housing company C&P Homes. In 1999, C&P defaulted on its loans totaling more than P10 billion. The funds were used in buying more raw lands during the heyday of property development before the financial crisis in 1997.
Caught holding the bag were creditor banks, and institutional and small investors that availed themselves of its debt papers. None of the other four companies listed in the SAL could have been profitable. They are in real estate businesses, and the industry is in a glut now.
Congresswoman Villar was quoted as attributing the P74 million increase in assets to dividends declared by one of their companies.
Senator Villar, described as the brown tycoon with a rags-to-riches life story, made his fortune when his gamble on the lowcost housing units—then an untapped market of the big property developers—paid off. His buyers were mainly overseas workers who wanted to invest their hardearned money on a house and lot. His housing units went like hotcakes. So successful was his venture that he earned his first million at age 26. Eventually, other developers followed suit.
In a quest to maintain its market share, C&P Homes reportedly benefited from the wholesale loan proceeds from the Unified Lending Home Program, former President Ramos’ vehicle to jumpstart his administration’s housing program. Because developers milked the government’s coffers allotted for housing projects, the National Home Mortgage and Financing Corp. ended up bankrupt with more than P40 billion in uncollectible loans, while Pag-IBIG Fund, which assumed some of these bad loans, is reeling from the effects of that bailout.
Bankrupt Manuela
While the link between the Villars and C&P Homes is certain, their link with another company beset with debt problems, the Manuela Corp., cannot be traced, at least on paper. Senator Villar has denied repeatedly that he has a controlling interest in Manuela.
Manuela was put up by Doña Manuela Aguilar Riguera, the grandmother of Congresswoman Villar. Her brother Rosalino Riguera, now mayor of Las Piñas, is currently the chairman of the corporation. It operates two malls—Starmall in Shaw Blvd. and Manuela Metropolis Mall in Alabang. There is talk that sometime in 1998, when Joseph Ejercito Estrada had just assumed the presidency, a syndicated loan totaling more than P3 billion coming, mainly from the Social Security System (SSS) and Government Service Insurance System (GSIS), was allegedly being arranged for Villar, then Speaker of the House. According to a former top SSS official, the proceeds were supposed to be infused into the already ailing Manuela Corp. The loan reportedly was not released after word about it was leaked to the media.
NEWSBREAK learned that management officials of C&P Homes who are associated with the Villars were actively involved during the five-year negotiation with a consortium of banks for a restructuring loan program for Manuela Corp. Sulficio Tagud, C&P’s chairman until his retirement a few months ago, and Jerry Navarette, C&P’s president, have been Manuela’s representatives at the negotiation, according to bankers who took part in it.
Starmall (previously named Manuela) and Manuela Metropolis Mall in Alabang were put up as collateral for the loans. The loans were secured by a mortgage trust indenture, which pools the assets to be used as collateral for a company’s debts. The two malls apparently represent 85 percent of the company’s total assets.
Manuela’s six creditor banks initiated foreclosure proceedings on the two malls after no agreement was reached on the loan restructuring.
Manuela’s loans, which had a principal amount of P1.3 billion before the company defaulted five years ago, have now climbed to P3.3 billion owing to accumulated interest and penalty charges.
As a result, the banks now conclude that the company is bankrupt. They also believe that the company cannot be a going concern as long as it is saddled with debts.
The consortium has calculated the company’s total liabilities to be about P6.8 billion. Manuela claims P4.87 billion only.
According to bank estimates, the company assets have a market value of not more than P4.23 billion, a far cry from Manuela’s estimate of P12.43 billion as of 2001. The consortium, led by the Bank of the Philippine Islands, calls Manuela’s valuation “highly speculative†because of the continuing slump in retail industry.
The consortium says that Manuela doesn’t have enough assets to cover its liabilities.
The consortium also questioned the veracity of Manuela’s reported interest expense. It has reportedly been understated for the past years, thus bloating the company’s net income by about P300 million.
Manuela’s interim financial statement as of Dec. 31, 2001, reflects a net loss of only P52 million, deliberately excluding interest expenses of about P332.8 million, the consortium claims. The complaints submitted by the consortium to the court reads “exposure to its creditors is far beyond its capacity to pay, especially considering that in the past three years, gross revenues hovered only around P234 million.â€
Inflated Assets
Inflating the value of assets was noted to be common among the companies associated with the Villars.
In C&P’s case, for example, market values of the housing properties being surrendered to pay the small investors were more expensive by over P10,000 per square meter. This arrangement is still sluggishly moving three years after C&P defaulted.
Pricing, too, was a sticky point when the Ayalas were contemplating to acquire a share in C&P sometime in 1998. Ayala eventually gave up.
In the case of Manuela, the negotiations for the loan restructuring dragged for five years also partly because they couldn’t agree on the pricing of their assets.
Manuela presented a restructuring package that involved stretching the maturities of its loans up to 15 years. The bank consortium rejected it. “Manuela,†they said, “is unlikely to make enough money to pay up over the next 10 years, because the developer’s insolvency is irreversible. Therefore, rehabilitation is not realistically feasible.â€
Manuela needs gross revenues of P2.04 billion in order to pay principal and interest alone to its creditors. For the past three years, Manuela’s revenues hovered around P230 million only.
The loans were used to finance the construction of the two malls, which were struck with physical restraints. Starmall, for instance, saw consumer traffic deteriorate during the construction of the Edsa-Shaw Boulevard flyover and the Metro Rail Transit (MRT) and has barely recovered since.
Adding to their woes, the two malls appeared to be confused about their target markets.
The court recently assigned a receivership committee to decide on how the debts will be addressed. In that may lie the fate of the two malls.
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