Primetown said this has resulted in the closure of a long-pending P22.9-million debt overhang booked under accounts payable and accrued expenses. The transaction also resulted in a net loss of P5.7 million.
In June 2003, Primetown filed a petition for the suspension of debt payments and rehabilitation with the Makati Regional Trial Court to prevent creditors from instituting foreclosure proceedings against its assets.
The rehabilitation plan involves the reduction or settlement of P942.2 million in remaining liabilities through a dacion en pago or payment-in-kind scheme and asset/cash infusion by the firm’s controlling stakeholders, the Yap family.
Apart from Metrobank, other creditors of Primetown include Philippine Bank of Communications (P86.6 million), Government Service Insurance System (P50 million), Asiatrust Banking Corp. (P40 million), and Allied Banking Corp. (P78.7 million).
Primetown implemented a program of gradually reducing its debt burden by entering into various restructuring and dacion en pago arrangements with its creditors. This has resulted in the reduction of its bank debts to only P549.9 million from a peak of over P3 billion in 1998 when the company sought a moratorium on its debt payments.
Bulk of the remaining assets of the company have good potential value only if the company is rehabilitated. These assets include a joint venture interest in Gold Coast Towers project at P111 million. In view of the company’s default in completing the project, the joint venture agreement is currently the subject of petition for rescission filed by the landowner.
Having suspended all construction activities since 1998, Primetown has been able to sustain its operations only by collecting receivables relating to its completed projects, liquidating some of its assets and recovery of input VAT credits accumulated from previous construction activities.
To date, the rehabilitation plan has not yet been approved by the court. Once its rehabilitation plan is approved, the company believes it will be in a strong position to attract new investors and new projects into the company, thereby allowing Primetown to resume its interrupted real estate development business or to venture into another business.
Primetown said the rehabilitation could take two years to complete due to the court proceedings.
The company was formed in 1989 and was listed at the Philippine Stock Exchange in 1995. Armed with fresh funds from its initial public offering, Primetown then went into a rapid expansion mode in 1996. It launched Gold Coast Towers in Mactan, Cebu, Diamond Head International Resort in Boracay Island; and The Meditel along Shaw Boulevard.
With the launch of these big projects in 1996 and incurred more than P3 billion in bank loans, Primetown was caught flat-footed when the Asian financial crisis hit the Philippines in July 1997 and became even worse in 1998, sending the Philippine peso from its pre-crisis rate of P26 to $1 to an all-time low of P55. Consequently, interest rates shot up from 14 to 30 percent.