NSC debt restructuring plan hits snag

The debt restructuring plan for the National Steel Corp. (NSC) has hit another snag following the decision of the French banking giant Credit Agricole to bail out from its exposure to the steel firm, Trade and Industry Secretary Manuel Roxas II said yesterday.

"Credit Agricole wants the Philippine government to basically buy out its exposure in NSC," Roxas said.

Roxas, however, said the government "cannot do that because it would trigger a parri-passu clause applicable to all other creditors of NSC."

A parri-passu clause requires that any payment or treatment to one creditor must be offered or should be applicable to all other creditors.

Under this particular clause, a preferential treatment to one specific creditor cannot be given unless it is also offered equitably to all other creditors.

Credit Agricole has the single, biggest foreign exposure in NSC amounting to P1.6 billion.

The Philippine National Bank (PNB), on the other hand, is the biggest local creditor bank with an exposure of P5.6 billion.

Under the debt restructuring plan for NSC, there will be a significant write-down of debts on the part of the local creditors and dilution of shares as well as a reduction in equity on the part of the Malaysian owners.

The agreement also provides that some of the assets of NSC would be liquidated and NSC would be reopened by getting either a new investor or an operator.

All the NSC creditors and the Malaysian shareholders had appeared to be in agreement over the debt restructuring plan early this year and even agreed to sign an agreement on the restructuring of the debts and the rehabilitation of the steel firm in November last year.

However, as it turns out, Roxas said "Credit Agricole chose to hold out and is asking the Philippine government to buy its exposure in NSC."

"But the government is lukewarm to Credit Agricole’s proposal because of the pari-passu clause," he added.