The Securities and Exchange Commission (SEC) prevented Hong Kong-based Grogram Ltd., and its affiliates MBFI Inc. and credit card company MBF Card Inc., from holding their stockholders' meeting which was supposed to take place yesterday.
In its order, SEC Chairman Lilia Bautista restrained Grogram, MBFI and MBF Card from taking up the agenda specially involving the matters of the proposed authorized capital stock increase as will as the proposed equity divestments.
The TRO was requested by Grogram's estranged partners, Unitrust Development Bank (UDB), Insurance of the Philippine Islands Co., Benthel Development Corp., Group Management Corp., and UDB's principal stockholders, Rufino R. Tan, Emigdio Tanjuatco Sr., Jose Luis Yulo Jr., Edgar Delfonso, Agapito Thelmo and Cleothilde B. Francisco.
In their petition, UDB south to prevent Grogram from proceeding with the meeting of stockholders to approve the increase in capital stock and the proposed divestment in the two companies.
Publicly-listed insurance firm MBFI Inc. had said it will divest its stakes in credit card unit MBF Card and UDB as part of its plan to make a clean slate of its balance sheets.
MBFI acquired a 30-percent stake in UDB through a shareholder's agreement signed in 1995 wherein MBFI agreed to invest in UDB to make it possible for its credit card unit MBF Card Inc., to utilize the lending operations of UDB and thus, generate credit and business for MBFI and its parent firm, Grogram.
Later on MBF Card entered into a card affinity agreement with UDB, wherein MBF Card will issue credit cards and UDB will extend financing to the cardholders.
Under the agreement, UDB will collect receivables from cardmembers, the proceeds of which represent the payment of MBFI's acquisition of stake in UDB. UDB said MBFI later violated several provisions of the agreement.
Grogram subsequently offered to buy back from UDB the card receivables which became past due for more than 120 days. However, some of the receivables became delinquent and these receivables were sold to MBF Card by UDB.
As a result, the regular receivables stayed in the books of UDB while the delinquent receivables were transferred to MBF Card. As the level of delinquent receivables grew over the years, MBF Card, due to its own financial hardships, was unable to repurchase the bad receivables from UDB.
UDB added that in gross violation of their card affinity agreement, MBF Card also removed all of UDB's directors and officers as co-signatories to the collection acounts opened and operated solely by MBF Card with the third party payment center banks. UDB was subsequently denied by the third party banks, Metrobank, Banco de Oro and Asian Bank, of its request to disallow withdrawals from the collection accounts without the signatures of UDB's co-signatories.
But the last straw, according to UDB, was MBFI's plan, in concert with Grogram and MBF Card's attempt to increase its authorized capital stock from P100 million to P500 million, effectively divesting itself to its entire equity investment in MBF Card and UDB.
UDB said the proposed authorized capital stock increase is tendered to dilute, and render inutile, UDB's shareholdings in MBFI. The shareholdings were acquired when UDB foreclosed on the deeds of pledge assigned by MBFI, representing P70.267 million in overdue credit card holder accounts, including an earlier loan of P24 million extended by YDB to MBF Card.
UDB is seeking to recover the amount of P70.267 million representing the outstanding balance on overdue credit card holder accounts, and P100 million in exemplary and moral damages.