SPAV formed to hold P20-B assets of NSC

In what is seen as a prelude to the long-delayed reopening of the country’s biggest steel maker, National Steel Corp. has formed a special purpose asset vehicle to hold its assets which will be bid out to prospective investors.

Securities and Exchange Commission Chairman Lilia R. Bautista said NSC has incorporated a shell corporation named Philippine Newsteel Industry Inc., to own the P20 billion worth of assets of the debt-saddled steel firm. The new company, she said, has already applied for registration with the SEC.

These assets include all the movable equipment and real properties directly used for plant operations, all of which are mortgaged to NSC’s creditor banks under a mortgage trust indenture.

The establishment of the SPAV follows the signing of a memorandum of agreement between NSC’s major shareholder, Hottick Investments ltd., and creditor-banks with respect to the disposition of the steel maker’s assets and liabilities.

Under the MOA signed last month, one or more special purpose asset vehicles may be organized to acquire, hold, operate or lease out the Iligan plant, which has remained idle for a little over three years now.

The agreement provides that the chief operating officer and the chief financial officer of the SPAV must be selected by NSC’s secured creditors subject to the concurrence of Hottick while all other officers shall be elected with the conformity of shareholders representing at least 67 percent of the outstanding capital of the SPAV.

The SPAV shall assume the P2-billion loan obligations of NSC to its secured creditors. It will be structured in a manner that will allow secured creditors to effectively convert their loan receivables from NSC into equity in the SPAV.

As a result of the MOA, creditor-banks now own 80 percent, bringing down Hottick’s stake in the steel firm to 20 percent from 82.5 percent.

Bautista said the next step would be to start preparing the terms of reference on the sale or lease of NSC’s mothballed facilities to revive the firm’s operations.

Trade and Industry Secretary Manuel "Mar" Roxas II, said earlier he expected the Iligan plant to resume operations by the middle or the end of January next year.

Roxas said the new investor in NSC would need between P1.5 billion and P2-billion to restart the firm’s plant. The money would be used as initial working capital and to finance the refurbishment of the factory back to efficient levels.

Meanwhile, the government must assured tariff protection for NSC products to get interested investors to bid for the mothballed steel firm.

According to John K.C. Ng, chairman of the Cathay Group of Companies, it would be interested in bidding anew for NSC only if the government commits to provide tariff protection for NSC.

The commitment, Ng insists, must be includedin the contract so that the government cannot back out from extending the tariff protection.

Without the tariff protection, Ng explained, investors will not likely make an offer for NSC.

Cathay Pacific Steel Corp., along with Allengoal Steel and Trading and Voest Alpine are among the interested bidders/operator of NSC.

According to Ng, investors in NSC must be ready to put in at least P2 billion in the steel firm as initial working capital.

Capasco, Ng assured is ready with the funds to operate NSC.

Government has recently been able to broker a debt restructuring for NSC, which would finally pave the way for the new majority owners to negotiate with interested investors to either sell some assets or operate NSC. – Marianne Go