Creditors give go-signal for liquidation of National Steel

Finally, the liquidation of National Steel Corp. (NSC) is on the roll as the company’s creditors have agreed on the terms of its asset sale.

In a letter to the Securities and Exchange Commission (SEC), the counsel for NSC liquidator, lawyer Danilo Concepcion, said both the secured and unsecured creditors of the steel firm have approved the segregation of the company’s assets to facilitate their distribution.

The liquidation of the Malaysian-controlled steel company thwarts all efforts to bring it back into operation through various rehabilitation schemes hatched by the SEC’s designated team of receivers and its owners themselves after NSC closed shop in late 1999 and filed for debt relief afterwards.

NSC is 82.5 percent owned by Malaysia’s Hottick Investments while 12.5 percent remains with the Philippine government and the remaining five percent is held by Marubeni Corp. of Japan.

The Benitez Parlade Africa Herrera Parlade & Panga Law Offices, acting as counsel for the liquidator, said in a manifestation that more than a majority of the creditors have given the go-signal to divide the company’s assets into plant assets and other assets.

The concurrence was helped by the fact that most of NSC’s secured creditors are also unsecured creditors who have extended loans to NSC without security. The City of Iligan, for example, is a secured creditor on account of the preferred lien it has on all the plant assets for the unpaid real estate taxes.

Based on the creditors’ agreement, the plant assets will consist of all the parcels of land located in the Iligan plant site which are necessary to contain the operation of the plant in an integral site; all mills standing thereon; all the heavy equipment fixed thereto; and all the necessary appurtenances thereof.

The other assets, meanwhile, will loosely constitute all assets other than the plant assets.

The counsel said almost all of the plant assets are included in the mortgage trust indenture (MTI) executed by NSC in favor of its secured creditors except for the two parcels of land where the wharf and part of the billet shop are located. The creditors agreed to include the two land parcels to the plant assets.

Based on the agreement, the secured creditors consented to limit their recovery to the plant assets for the full amount of all their secured credits and for the full amount of their unsecured credits in case they are also unsecured creditors.

In effect, the secured creditors agreed to waive their right to recover from the other assets the following: 1) any amount of their secured credits not covered by the proceeds of the plant assets, and 2) any amount of unsecured credits they may at the same time have against NSC. Moreover, the creditors agreed to allow the other assets to be allocated exclusively for the benefit of the unsecured creditors who do not have secured credits against NSC.

On the plant assets, the secured creditors have agreed to share these pro rata on the basis of their total combined secured and unsecured credits, respectively. The unsecured creditors, on the other hand, agreed to share the other assets on the basis of the preference of credit provisions of the Civil Code. — Conrado Diaz Jr.