Metro Pacific may undergo major corporate restructuring

HONG KONG – A major corporate restructuring to enhance the value of Metro Pacific Corp. (MPC) is being considered. Such restructuring which may include spinning off and listing money-making subsidiary Landco Pacific Corp. or creating an entirely different entity parallel to MPC to raise funds for several Landco real estate development projects, and spinning off beleaguered unit Negros Navigation Co. (Nenaco).

MPC president and CEO Jose Ma. Lim said that in order to finance ongoing projects of high-end property development unit Landco, including the 350-hectare Costa Madera project in Batangas, MPC management is considering either spinning off Landco and undertaking an initial public offering (IPO) in order to raise funds or to create an entirely separate entity that will be parallel and not under MPC to undertake the fund-raising activity.

MPC director Manuel V. Pangilinan said the plan also includes bringing down MPC’s debt levels from the present P4 billion down to P500 million by the yearend. "Metro Pacific is not in a dead state. The challenge for us is to prove that we can turn around the company," Pangilinan, managing director and chief executive officer of Hong Kong-based First Pacific Co. Ltd. which has an 80.6-percent interest in MPC, said.

The corporate restructuring of MPC, Pangilinan explained, will take advantage of the company’s property assets in order to develop cash flows. "We are confident that MPC will be in a better position next year," he stressed.

Lim said the reduction of the debt level to P500 million by yearend will be accomplished via a dacion en pago (payment in kind) to MPC creditors using shares in Bonifacio Land Corp. According to Lim, MPC still has a 15-percent stake in BLC which it can use to pay off the former’s debts. Another mode to reduce debts is by offering units in MPC-owned Pacific Plaza Towers to creditors holding promissory notes.

Pangilinan said they are currently contemplating on taking Nenaco out of MPC and spinning off the shipping subsidiary into a separate entity, and pooling all of MPC’s property assets that are doing well. One of these assets is an 90-hectare undeveloped property in Samal Island, Davao.

He pointed out that right now, there are no plans to sell Nenaco especially since the latter has a petition for court rehabilitation. "But if later, anybody offers a decent price for Nenaco, it is up to us to consider but the focus right now is to ensure the smooth implementation of Nenaco’s rehabilitation plan," he said.

In mid-2003, Landco, in conjunction with Roxaco Land Corp. (its partner in the successful Peninsula de Punta Fuego and Terrazas de Punta Fuego projects) made an undisclosed equity investment in Fil-Barcelo Hotels and Properties Management Co., the Philippine licensee of international hotel management company Barcelo Hotels and Resorts. Barcelo Hotels and Resorts is a major hotel management company based in Palma de Majorca, Spain, and operates hotel and resort properties in Europe, North and South America as well as the Philippines.

Landco profitability is largely attributed to the success of its Peninsula de Punta Fuego project, and revenues from its Leisure Farms and Terrazas de Punta Fuego projects.

Pangilinan said MPC does not need external support from parent First Pacific nor does the latter have any plans of making further advances to MPC beyond what has already been advanced.

MPC in 2003 registered a loss of P837.9 million which includes an P828.9 million additional asset impairment provision for Nenaco which is 97 percent owned by MPC.

Nenaco has filed a petition with the Manila Regional Trial Court for corporate rehabilitation last March 29. The shipping subsidiary reported a net loss of P15.6 million during the first three months of 2004 compared to a net profit of P10.5 million in the same period last year. The loss is due to reduced passengers and cargo carried during the period which officials said resulted from lesser number of vessels in service. Nenaco has debts of about P2.5 billion

The repositioning of Nenaco, which will be made by spinning it off into a separate subsidiary from parent MPC, is in line with Nenaco’s proposed rehabilitation program, Lim explained.

Earlier, Lim stressed: "Events at the Nenaco level are a disappointment to those who had believed in recent months that Metro Pacific’s fortunes had finally turned for the better. While there is a degree of short-term pain to be endured as a result of Nenaco, the broader outlook for Metro Pacific is encouraging."

Earlier, Pangilinan and Lim revealed that Nenaco will be able to pay off debts pertaining to equipment leases five years from now, and those to other creditors, 10 years from now.