Who benefits in squeezing Nenaco out?

There is no doubt that a squeeze play is being employed against Negros Navigation Co. (Nenaco), the country’s oldest shipping firm and a subsidiary of Metro Pacific Corp.

Aside from Nenaco, the victims here include some 20,000 passengers who were left stranded last weekend because some government agency seemed to have been influenced in desisting from issuing clearances to allow the shipping firm’s vessels from setting sail.

Considering that there was no issue about seaworthiness or safety, one wonders why Marina held back the issuance of clearances on a weekend to the detriment of thousands of travelers.

Prior to the incident, text messages had been circulating about Nenaco’s alleged manipulation of books to supposedly show profit when there was none. This apparently was what "pressured" the Maritime Industry Authority’s to not allow Nenaco’s vessels to pull out of harbor.

While Nenaco is not exactly spotless, having been weighted down by a debt burden exacerbated by the 1998 Asian crisis plus a host of difficulties caused by a confluence of market and regulatory concerns, the proper forum that decides on its financial (mis)conduct is definitely not the Marina.

A String Of Debts

Obviously, Nenaco is mired in debt. It has about P2.4 billion in unpaid debts by the time it asked and subsequently obtained a stop-payment order from the Manila Trial Court just weeks ago.

Nenaco said it was forced to seek relief from the court so it could restructure P2.4 billion in debt payments within 10 years while allowing it to finance P2.9 billion in capital and dry-docking expenditures over the same period.

The inter-island shipping firm said its rehabilitation plan should generate sufficient cash flow to finance necessary dry-docking expenses and capital expenditures that would ensure all vessels are in good working condition.

At the same time, the rehabilitation would also allow the company to comply with international safety standards as well as settle its financial obligations "in a fair and just manner in a shortest possible time."

The same court appointed Sulficio Tagud Jr., the whistle-blower in the overpricing of the Diosdado Macapagal Boulevard, as receiver to facilitate an orderly payment of Nenaco’s dues.

Crying Ouch

The Manila court order appears to have triggered Cebu-based ship builder and repair firm Tsuneishi Heavy Industries Inc. to ask a Cebu court to issue a warrant of arrest on one of Nenaco’s vessels, the M/V St. Peter the Apostle, last March 12.

Nenaco, it seems, had failed to settle more than P80 million in principal obligations to the Japanese shipbuilder. Including interests, says Tsuneishi, Nenaco owes the shipbuilding and repair company more than P120 million as of April.

Interestingly, the Cebu court also placed on similar arrest five other Nenaco vessels – the M/V San Sebastian, M/S Princess of Negros, M/V Nuestra Senora de Fatima, M/V Sta. Ana, and M/V San Paolo.

Nenaco quickly points out that just one vessel would have been more than enough to account for its outstanding obligation with Tsuneishi. So why should the Japanese firm want to seize six vessels when one was more than enough?

With a host of creditors – most of who had far bigger exposures – at risk with the shipping firm’s debt problem, why was Tsuneishi also the only one fiercely pressing for collection, and even carrying the whole exercise to the extent of permanently impairing the company from doing business?

Squeezing To Collect Or To Sink

Tsuneishi admits that the loans it extended to Nenaco are unsecured. But more than the obligations, it appears that 20 percent of the reason for Tsuneishi’s full court press is due to competition, being one-fifth owned by Aboitiz & Co., the very same owners of Aboitiz Transport Systems Inc. or formerly WG&A, incidentally staunch competitor of Nenaco.

Yes, Aboitiz is also the very same shipping firm whose passenger vessel, SuperFerry 14, caught fire near Corregidor last February. The accident, as with similar incidents, expectedly affected passenger traffic of Aboitiz ships that also plies the very same routes of Nenaco.

Weeks after the SuperFerry accident, Tsuneishi started pressing Nenaco to settle its obligations. The Japanese firm, however, claims that it has been going after Nenaco to pay its debts since 2002. Tsuneishi says that Nenaco defaulted on payments in November 2002 so that in January 2003, it was forced to file a case.

Tsuneishi also raised the issue of Nenaco’s P103-million net income in 2002, coming at the heels of a whopping P1.8-billion consolidated net loss during the previous year. Tsuneishi claims that the Securities and Exchange Commission is investigating Nenaco’s financial reports. Nenaco has denied this.

But surely a case that may have to be resolved by SEC does not justify the wanton and irresponsible actions of Marina to ban Nenaco vessels and cause so many passengers to be stranded on a weekend.

Is this merely a case of unpaid obligations that has to be settled? Or, is the conflict more complex and involves easing out of competitors to gain the monopolistic edge on highly profitable shipping routes? Whatever it is, please do not impair the hapless riding public who only want to reach their destinations safely.

mpending Water Crisis On TV

I"Isyung Kalakalan at Iba Pa" on IBC News (4:30 p.m. and 10:30 p.m., Monday to Friday) completes today discussions about an impending water crisis. With the population of Metro Manila and surrounding municipalities continuously growing, the government cannot delay further projects that will develop other sources of water such as the Laguna de Bay. At the same time, consumers of water, both industrial and individual household, have to take seriously the need to stop wasteful usage of water. Watch it.

‘Breaking Barriers’ With Pia ‘Companera’ Cayetano

"Breaking Barriers" on IBC (11 p.m. every Wednesday) will feature Atty. Pia "Compañera" Cayetano, the youngest senatorial candidate this coming elections, on Wednesday, 5th May 2004.

On May 10, will voters be ready to push the old "politicos" into oblivion and stake their future with the new breed? Are the young ones really the new leaders that will push the country forward? Or are they also of the same mold as the elected officials we had for the past several decades, scheming and working for their own self-interest once in position? What prompted these young candidates to join the game of politics? Watch it.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.