Government draws up guidelines for lease of NSC fa

With the Malaysian owners finally agreeing to get out of National Steel Corp., the government has drawn up the guidelines for the bidding of the steel firm’s plant facilities under a lease contract.

Under the lease project, the financing, rehabilitation, operation and management of NSC’s Iligan plant will be carried out by the winning proponent.

Three groups had earlier offered to reactivate the operations of NSC under lease agreements to maximize the use of the plant facilities since shutting these down in November 1999.

The Securities and Exchange Commission (SEC) has ordered the liquidation of NSC after the company’s receivership committee and the Malaysian majority owners Hottick Investments Ltd. failed to draw up a rehabilitation plan agreeable to the company’s creditors as well as to attract a "white knight" who would infuse additional capital into the debt-laden steel firm.

The Iligan plant was closed down after continued losses, exacerbated by the dumping of cheaper products mainly from Russia. NSC was eventually forced to seek the Security and Exchange Commission’s help for debt relief on its outstanding loan of over P16 billion.

Aside from the original lease proponent, Allengoal Steel Fabrication & Trading, the bidding is expected to attract two other companies, Cathay Pacific Steel Corp. and Glencore Far East Philippines AG of Switzerland, along with an unidentified European company which has already established presence in the Philippines.

Based on the terms of the lease, the works may include the rehabilitation, operation, and maintenance of the hot mill and cold mill plants, the electrolytic tinning line, the billet shop and the ancillary facilities.

Aside from their financial capability, the bidders must also possess the technical know-how and experience in running a steel plant.

Reflective of the magnitude of the project, a cash deposit of at least P500 million to be held in escrow with a reputable bank or financing institution or a committed credit facility of the same amount will be required, on top of another P500 million (in the form of cash, manager’s check, standby letter of credit or bank guarantee) as operation performance security by the winning proponent to guarantee faithful performance of its obligations under the lease and operate agreement.

All interested bidders have until Sept. 21, 2001 to submit their offers to the NSC’s evaluation committee.