Finance Undersecretary Eric Recto, chief of the Privatization Council which oversees the sale of government assets, has announced an indefinite stay on any auction of PNCC shares and properties.
Recto said the postponement of privatization plans for PNCC is due to the planned expansion of the Southern Luzon expressway but insiders at the Privatization Management Office (PMO) have acknowledged that legal cases also played a role in the government decision.
Recto has tried to downplay the PNCC debt and the state-owned firm’s lawyers have claimed the prescription laws, which mandate continued collection efforts, leave the company in the clear. But court evidence filed by private firm, Radstock Securities Ltd., show a paper trail on the efforts of original creditor Marubeni and recent PNCC acknowledgement of the debt.
Marubeni sold its receivables to Radstock, which filed the attachment suit, presenting evidence of creditors’ demands to disprove government claims that the 10-year prescriptive period had elapsed.
Court papers show PNCC acknowledged its obligations in 1987, 1988, 1993, 1996 and then in 2000, when a board resolution placed the firm’s debt to Marubeni at more than P10 billion as of Sept. 30, 1999.
The documents show PNCC guaranteed the debts of its subdisiary, CDCP Mining. The original debt was valued at 5.6 billion yen or more than P2 billion at current foreign values. Interest charges and penalties have pushed up the debt of P13 billion and a Regional Trial Court ordered PNCC to pay Radstock this amount last December.
The Mandaluyong Regional Trial Court had also issued an attachment order in January 2001, covering prime PNCC assets including tollway proceeds, after Radstock presented evidence indicating the firm’s growing inability to pay back its loans.
In December 2000 and 2001, the Commission on Audit reprimanded PNCC for fudging on its financial report, including results of operations and cash flow. The PNCC said the COA-ordered changes would result in a "capital deficiency" for the company and invite claims from creditors, shareholders and joint venture partners.
The government appealed the RTC decision with the Court of Appeals but later sought help from the Supreme Court, which is hearing the state petition.
Radstock has accused PNCC’s lawyers of forum shopping, saying the state had cooperated in legal proceedings. Government lawyers had first sought to bar the RTC case but their petition was dismissed by the Court of Appeals, leading to formal hearings.
Radstock’s officials include former Aquino Cabinet member Carlos Dominguez, who has just sold his interest in PASAR and has longstanding ties with the Sultan of Brunei, and Ian Cristie, C.B.E., M.C. a retired general, former director of the Hong Kong General Chamber of Commerce and former deputy commander of British Forces in Hong Kong. The leading Hong Kong investment bank, Anglo Chinese Corporate Finance Ltd. is a key adviser.