More changes in Philippine Airlines

There’s something quietly brewing in Lucio Tan-owned Philippine Airlines again, my sources say.

An esteemed and longtime member of the flag carrier’s board of directors tendered his resignation on Friday after encountering a major roadblock related to one of the company’s crucial plans toward recovery. The board is scheduled to meet today, July 26, and part of the agenda is to decide whether or not to accept the resignation.

Against this backdrop, a member of the Tan family may join PAL again after leaving the airline not too long ago.

The family member will supposedly help “fix things” or help the company navigate through the pandemic and possibly, perhaps speed up the airline’s restructuring and recovery plan which has been on the table for roughly 15 months now.

If and when this pushes through, I am guessing there will be key changes in management, C level.

Whether or not this actually happens remains to be seen. As usual, it’s another chapter in Philippine Airlines’ continuing saga.

Amidst the internal goings-on, it’s still business as usual for PAL with its indefatigable management team, employees, and the rest of the crew heeding the call of duty in these difficult times. The airline continues to transport people and vaccines between different parts of the country and beyond.

“We’re still here and still getting our salaries,” one pilot told me.

One thing is sure – having an airline company may be a legacy business, but it is certainly not without headaches, the severe throbbing and splitting kind that won’t let you sleep at night, especially in this time of a global health pandemic.

FILREIT dividends

The Filinvest Group’s real estate investment trust FILREIT is ready to list its offer of up to 1.6 billion common shares, plus an over-allotment option of 163.4 million common shares, at a price of P7.00 per offer share to raise up to P12.6 billion in gross proceeds. The target listing date is Aug. 12.

According to the REIT plan filed with the Securities and Exchange Commission, FILREIT’s dividend yield is 6.3 percent for 2021 and 6.6 percent for 2022, significantly higher than prevailing market rates on fixed-income investments such as government and corporate bonds.

UTrade’s computation is around 5.8 percent for 2021 and 6.2 percent for 2022.

“We assumed FILREIT will give out 100 percent of its adjusted funds from operations during the first two years (versus the minimum 90 percent of distributable income). Our yield forecast for this year is higher versus what government bonds currently offer at select tenors. This is also higher compared to dividend yields in Malaysia and the Philippines (AREIT and DDMPR) based on our calculations,” UTrade said.

Disgruntled minority shareholders

Speaking of companies, I heard that some minority shareholders of listed SFA Semicon Philippines Corp. (SSP) are questioning the move of the company to revise a contract with a Korean giant, saying that the agreement had been detrimental to the interest of the company and its minority shareholders.

The shareholders are pointing to new production contracts between SSP and the Korean company entered into in 2016 or after SSP’s initial public offering.

In December 2014, SSP made its market debut at P3.15 per share, based on earnings generated mainly from production contracts with the Korean company. The major pricing terms of the production contract was the cost-plus 10 percent margins.

However, in May 2016, the controlling interest of SSP crafted a new production contract with the Korean company, which removed the cost-plus 10 percent margin, replacing it with what the minority now sees as “unfavorable pricing terms.”

Minority shareholders, in several letters to SSP management, claim these unfavorable terms generated an operating profit margin of only less than three percent.

SSP’s average share price is now at P1.25 per share.

The group is also clamoring for board representation. At present, the 85 percent controlling shareholders elected five South Koreans directors, along with the two Filipinos independent directors. But the 15 percent minority shareholders – mostly Filipinos – said they deserved to have one seat on the board.

SSP, in response to the minority shareholders, said there is no rule or principle in business or law that mandates that a contract between any two parties be permanently cast in stone, and it is not reasonable for a stockholder to expect otherwise.

“Changing conditions and contractual arrangements will inevitably result in amendments to succeeding contracts among independent and commercially-driven parties,” SSP said.

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com