Mondragon rescinds MOU with CDC

Mondragon International Phils. Inc. (MIPI) has cancelled the memorandum of understanding (MOU) it had entered into with Clark Development Corp. (CDC) for their failure to reach a compromise in connection with the lease of the Mimosa Leisure Estate in Clark, Pampanga.

In a disclosure to the Philippine Stock Exchange yesterday, MIPI chairman and chief executive officer Jose Antonio U. Gonzalez said the company was constrained to rescind the MOU for various reasons stated in its communication with CDC, although he did not elaborate.

Gonzalez said Mondragon Leisure and Resorts Inc. (MLRC), a wholly-owned subsidiary of MIPI, and CDC have pledged maximum cooperation in their mutual efforts to quickly locate an investor for the Mimosa resort.

The MOU, signed last April 30, would have allowed the return of Mimosa to the Mondragon group.

Under the MOU terms, MLRC would be given a re-entry mechanism to take back management and control of Mimosa provided it was able to comply with the requirements set forth by CDC and in the alternative, for Mimosa to be leased by CDC to a new corporate vehicle to be formed for this purpose.

The new corporate vehicle, when established, shall be jointly owned and managed by MLRC and its creditors, with CDC having one seat in the board. CDC shall have oversight functions in the new corporate vehicle until such time MLRC’s rentals in arrears shall have been fully paid.

MLRC, which is into leisure and gaming, operates the Mimosa Estate which features among others a 36-hole championship golf course, a 304-room five-star hotel, various deluxe furnished villas and a gaming casino.

Since Dec. 1999, however, the government through CDC, has taken over management and operations of the said property after securing a favorable court order over its dispute with MLRC’s non-payment of tax and rental fees worth about P325 million, as well as reported violations of several terms and conditions of the lease contract.

Although MLRC has filed a counter-suit still pending with the courts, it has been in active negotiations with CDC for the resolution of rental issues, a principal component of which is the entry of new investors to bring in fresh equity into MLRC to settle its government obligations and restructure its P7-billion debts owed to a consortium of bank creditors.

In May 1999, the Supreme Court ordered CDC and MLRC to come up with a compromise deal. The deal was worked out under the guidance of the Office of the President on June 28 of the same year.