NSC rehab may finally push through

A debt restructuring of National Steel Corp.’s (NSC) P16 billion debt may finally be reached if the consortium of local banks agree to a debt-write down of at least P6 billion and if NSC’s majority owner, Pengurusan Danaharta Nasional Berhad, agrees to a corresponding write-down of $600 million of its $800 million investment in the mothballed steel firm.

"The creditor banks and Danaharta are close to signing a memorandum of agreement (MOA) on the debt restructuring of NSC’s debt," industry sources disclosed over the weekend.

The MOA, however, sources said, would then be followed by more specific transaction documents.

If Danaharta and the banks do agree to the terms of the debt restructuring, there would be a dilution of ownership on Danaharta’s part and a conversion of debt-to-equity on the part of the banks.

"Roughly, the bank’s debt-to-equity conversion would result to an equity stake of from 70 percent to 80 percent, while Danaharta’s shares would shrink from its present 82 percent to either 30 percent or 20 percent," sources said.

Government, for its part, would also see a dilution of its shares in NSC from 12.5 percent to less than five percent.

If Danaharta and the banks do finally sign the MOA, sources said, it would set specific steps and follow a strict timetable to convert the MOA to actual transaction documents.

Danaharta, sources said, is insisting on a shareholders’ agreement which would entitle it to voting rights and set special voting procedures in deliberating certain corporate decision that could be "corporate life-changing."

These decisions could involve the sale of assets or a change in the nature of business of NSC.

There are about 15 local creditor banks with the Philippine National Bank (PNB) having the biggest exposure in NSC.

However, sources said, banks would have to share "pro rata" in the debt restructuring.

If the banks and Danaharta do come to an agreement, their dispute would be removed from the jurisdiction of the Securities and Exchange Commission (SEC) and would again revert to a private corporate matters.

The parties could also settle down to rehabilitating NSC and reopening it either by accepting a bid from a third party to operate the steel plant or to reopen the plant and operate it by the new owners.