VMC president and CEO Arthur Aguilar said Tanduay, the liquor holding firm of the Lucio Tan Group, bested offers made by JG Summit Holdings and the Filinvest group, controlled by taipans John Gokongwei Jr. and Andrew Gotianun, respectively.
Aguilar said Tanduay offered to inject P300 million in fresh capital to VMC in the form of a loan at 1.5-percent interest rate per annum. The loan will be convertible to equity at par from the third year onwards. It will be equivalent to one seat in the 11-man board of directors.
Upon notification of the result, Tanduay put up P30 million in an upfront cash deposit yesterday and will deliver the remaining P270 million by next week.
Aguilar, declined to comment on the other bidders’ proposals.
It was only JG Summit which made a definite bid last week. It proposed a P2.3-billion buyout package, with P300 million as capital infusion in the form of a senior loan convertible to equity and P2 billion to "acquire all the rights, title, and interests of both VMC unsecured and secured creditors over their respective VMC shares, VMC convertible notes, and remaining debt and accrued interests."
The criteria set by the VMC board has set in picking the winning bidder include the capability to immediately release the P300-million capital; the effective borrowing cost subject to legal opinion on the 10-percent per annum rate prescribed by the SEC; the length of loan maturity, preferably longer than three years; length of grace period on principal repayments, if any; and the full disclosure of principal party.
The SEC, which is overseeing VMC’s quasi-reorganization, has set an April 15 deadline for VMC to raise the funding although VMC has requested for 60-day extension to have more time to review the bids and come up with the most advantageous proposal.
In December 2002, VMC stockholders approved the firm’s quasi-reorganization and elected a new set of directors led by Philippine National Bank executive vice president Omar Byron Mier as chairman.
PNB – majority owned by Tan himself– had the biggest loan exposure among the 27 creditor banks of VMC, followed by the East West Banking Corp. of the Gotianun group.
Under the quasi-reorganization, VMC’s creditor banks converted P1.1 billion in loans into about 70 percent of VMC’s equity, while another P2.4 billion in debts will be restructured into a 15-year term loan.
VMC, the largest sugar mill operator in the Philippines and one of the largest in the Southeast Asian region, has been under a debt relief program with the SEC since mid-1997 as it incurred heavy losses from operations due to the prolonged slump in the sugar industry at the time.
Aguilar said with the fresh funds, "we are going to propose an expansion plan to furhter modernize our plants to result in greater cost and energy efficiency to make the mill operations more viable."
"We need to do a lot of work in terms of energy and maintenance and balance our raw sugar manufacturing facility," he added.