Romeo Hermoso, VMC chief financial officer, said that London-based Kest Quartermain Venture Capital Partners Ltd. (KQVCPL) and General Electric Corporation (GE Capital) have offered to infuse $153 million in the debt-saddled sugar milling firm to help it get back on its feet.
Hermoso said the amount has been earmarked for the payment of VMC’s loans from the banks and other financial institutions amounting to about P6.5 billion, consisting of the loan principal of P5.2 billion and the accrued interest of P1.4 billion.
The bulk of the loan will come from GE Capital which will disburse the money directly to the creditor banks to pay off VMC’s obligations, including interest.
"On day one, VMC’s bank creditors will be paid 100 percent of the loan principal and 100 percent of the accrued interest," Hermoso said. "The beneficiary banks will, in turn, issue a standby letter-of-credit in favor of GE Capital."
Hermoso added that KQVCPL will get a 50-percent discount on the principal and accrued interest, "payable in equal installments over a seven year period."
"We believe that the foregoing arrangements would be advantageous to the banks," he said. "At the same time, the bank’s balance sheet will enhance its value as it will be cleared of its non-performing loans."
"In exchange, a contingent liability is, of course, off-balance sheet," he added. "The bank’s profit and loss picture will greatly improve considering that revenues will be realized."
To ensure the security of the loan, VMC will shell out a sinking fund from the company’s cash flow and KQVCPL’s subscription "to the rights issues which will aggregate to P4.1 billion by the end of the year."
"The liquidity of all bank creditors will be particularly enhanced and, under the current trend of mergers and acquisitions among banks and financial institutions, will improve its shareholders’ value as an acquirer or as a target of acquisition," Hermoso said.
The assistance of KQVCPL which has emanated from GE Capital, will boost the economy, including the banking industry, the government’s comprehensive agrarian reform program (CARP), and the farmers.
"The assistance will enhance VMC’s programs involving improved farm productivity, increase hectarage, propagation of high-yielding varieties to improve yields and quality canes at the farm level," Hermoso pointed out.
The sugar milling firm’s workers, most of whom were retrenched during its years of inactivity, have also expected to benefit from the loan of KQVCPL which will help compensate them.
"On the whole, the ultimate beneficiary of this assistance will not only be VMC, but on the larger scale, the sugar industry," Hermosa said.