Export Bank starts second part of Urban Bank rehab

The Export and Industry Bank (EIB) has started the advance payments worth P2.5 billion for the second tranche of its rehabilitation program for the acquired Urban Bank.

EIB, the "white knight" that acquired the bankrupt Urban Bank, has been rehabilitating the bank since its acquisition in 2001. Part of the rehabilitation involves the repayment of the loans and deposits of the former bank’s clients.

The amount to be repaid reached over P8 billion, which would be undertaken in several tranches to preserve the bank’s liquidity. Under a memorandum of agreement between the EIB and Urban Bank’s creditors and depositors, the payments would be undertaken in various stages or tranches under different time frames.

EIB had already availed of a P200-million special loan facility from the Philippine Deposit Insurance Corp. (PDIC) as additional funds for the bank’s re-opening last year. Another P1.5 billion in standby facility with the PDIC was also set aside in the event the bank fails to raise funds. So far, it has organic earnings from which the bank sources its repayment fund.

"We have not drawn funds for rehabilitation from the PDIC. The money we use to pay the depositors and credits are coming from our own resources such as loans and sale of assets," EIB president Benjamin Castillo said.

So far, EIB has already paid the first tranche last year and is prepared to fulfill the next one in September. Since, the original amount maturing this year is P4.5 billion, the bank already paid in advance almost P2 billion, leaving an existing balance of P2.5 billion.

"We offered to pay in advance but at a discounted amount. That was our successful strategy last year," Castillo said. "Thus by November 2002, the almost P4-billion worth of payables under the liability servicing plan was reduced by half."

Castillo admitted that they are holding talks with the depositors and creditors to take the same tack this year. However, it seems that a majority prefer to keep their money in the bank.

"Today, they would rather wait for September which is the stakeholders’ general meeting. The planned reactivation of our listed shares at the PSE may have a bearing on their decision," he added.

The shares remain under the listed name "Urban Bank" although trading was remained suspended since 2001. EIB has already filed for a change in listed corporate name to "EIB" and awaits word from the Securities and Exchange Commission (SEC) for the green light to resume trading.

However, the EIB board was hesitant to start trading early this year considering the poor economic conditions and the weak activities at the bourse.

The fulfillment of its rehabilitation program hinges on the bank’s ability to pay in full its depositors and creditors, and to reactivate trading of its listed shares at the bourse.