VMC submits revised plan

Cash-strapped Victorias Milling (VMC) is seeking the approval of the Securities and Exchange Commission's (SEC) of its revised rehabilitation plan which was drafted following the failed bidding for 53 percent of the company.

The management committee of VMC said the revised plan which essentially calls for a new joint venture partner and debt restructuring is seen to be more viable. It proposes a joint venture partner who will manage the sugar milling firm and provide the initial capital infusion of P300 million which will be used to cut its workforce to 1,700 from the current level of 2,700. The cash infusion will either be in the form of new equity or three-to five- year advantages on a last-in-first-out basis.

These two primary features should be in place within 120 days from the creation of a new VMC board.

Under the revised plan, the terms and conditions of the debt restructuring will be the same as originally approved by the SEC but the changes will be in the amount to be restructured.

To reduce the debt that will be restructured, VMC proposed to convert into equity all unpaid interest and part of the principal obligation to the non mortgage-trust-indentures (MTI) creditors, the amount of P1.1 billion. The original P1.5-billion conversion to convertible notes will be increased to P2.4 billion. these two actions will reduce the restructured debt level to about P3.05 billion.

Another feature of the revised plan is the reconstitution of the VMC board to be composed of three seats for existing VMC shareholders, one seat for secured creditors, six seats for ceditors with debt conversion and one seat for the joint venture partner.

Under the revised plan, the approved reorganization of VMC where the par value will be reduced from P10/share to P1/share will remain. The authorized capital stock will be increased to 4,605,086,296 shares instead of the original 2,563,035,708 shares.

From the new authorized capital stock, 495,975,670 shares will be issued to existing VMC shareholders. The balance of 1.1 billion shares will be issued in favor of the clean creditors who will convert their respective unpaid interest plus part of the principal into common shares.

The remaining unissued shares of 3,009,128,626 will be reserved for the P2.4 billion convertible notes and the proportionate of the RSDO claims in case the SEC recognizes them as clean credits equivalent to VMC's clean loans.

Since the company collapsed, the debt level of VMC has grown to P6.5 billion from P5.179 billion due to the accumulation of unpaid interest, which should have been paid from the VMC cash flow if the rehabilitation plan was implemented earlier.

In addition to the said debt, the contingent liability of P630 million could go to as much as P834 million if the SEC decides to consider the refined sugar delivery orders (RSDO) claims as direct liabilities of the company. This will further increase the debt level to P7.389 billion.

VMC said that if the original plan even without the RSDO liabilities was followed, the debt level that will be restructured will be P5.055 billion plus the convertible notes of P1.5 billion, higher by P1.4 billion. But given today's sugar prices, the VMC cash flow will not be able to serve additional debt of P1.4 billion even at a 10 percent fixed interest rate.

Based on the study done by the appointed working committee of the clean creditors, VMC can only handle the repayment of about P3.1 billion of 15 year loans at a fixed rate of 10 percent, assuming the price of sugar is P700 per 50 kilogram bag and given a further reduction of manpower to 1,700. It also requires direct conversion to equity and additional convertible notes amounting to P1.1 billion and P900 million, respectively.