Prime Orion Phils plans asset sale to pay P1.25-B loans

Prime Orion Philippines Inc. (POPI) expects to bring down its total outstanding loan obligations to P1.25 billion by the end of the year through the sale of certain assets or dacion-en-pago agreements.

In a disclosure to the Philippine Stock Exchange, POPI said negotiations are currently ongoing for the restructuring of the remaining balance of principal loans with a bank amounting to P1 billion.

POPI expects to conclude negotiations with the bank in one year.

Loans obtained from various banks were used to fund the expansion projects of the company’s subsidiaries.

POPI is also in talks with a potential strategic investor who will inject the needed capital for a stake in tile maker unit Lepanto Ceramics Inc.

The money will be used to repay existing debts and raise working capital to jumpstart and stabilize LCI’s operations.

In return, LCI will issue new ordinary shares equivalent to the capital infusion plus additional secondary shares.

The resulting initiatives would substantially reduce LCI’s existing debts to creditor-banks to a more manageable level of P400 million from P2.5 billion.

Negotiations are also ongoing with existing local and foreign creditor banks of LCI for the restructuring of debts.

The proposed loan restructuring scheme involves a combination of loan reduction through buy-out, negotiations for discounts and conversion into equity.

The proposed tenor for the retained loans is seven years with an interest rate based on LCI’s operational cashflows.

Prior to the currency crisis in 1997, POPI was among the leading holding companies in the country boasting a proven track record of profitability due to its investment portfolio in the property, manufacturing and financial services sector and its strategic alliance with the Guoco Group, one of the largest and most respected business conglomerates in Asia.

But the group was seriously weakened by heavy debt service and cost increases resulting from the lingering effects of the regional crisis.

It continues to be affected by high debt service and limited working capital at both parent and subsidiary levels.

Various initiatives are currently being undertaken by the group to strengthen core assets including Pepsi Cola Products Phils. Inc., Tutuban Properties Inc. and First Lepanto-Taisho Insurance Corp.

POPI bounced back to profitability last fiscal year after successive years of losses, posting a net profit of P508 million from losses of P38 million.

This was primarily due to strong sales volume growth and effective pricing strategies. Sales revenues rose 12 percent to P7.14 billion.

Pepsi likewise improved its position in the carbonated softdrink sector, accounting for 16.2 percent of the market, compared to its 15.1 percent share the previous year.

Pepsi intends to continue to pursue product development and innovation, increase distribution network, promote aggressive marketing programs and implement cost control strategies.

It is seriously considering to expand its business in the non-carbonated products sector to further enhance sales volume. – Zinnia dela Peña