Metro Pacific officials see debt-free Nenaco in 7 yrs

HONG KONG – Negros Navigation Co. (Nenaco), the shipping subsidiary of Metro Pacific Corp. (MPC), is expected to be debt-free in seven years, company officials said.

MPC president and CEO Jose Ma. Lim said based on the proposed rehabilitation plan of Nenaco, the latter plans to pay off debts pertaining to equipment leases after five years, and for other creditors, after 10 years, for an average of seven years.

MPC director Manuel Pangilinan, who is currently CEO of Hong Kong conglomerate which First Pacific has an 80.6 percent economic interest in MPC, said Nenaco is not hopeless. "If Nenaco needs a closure point, we will tell the stockholders," he pointed out. Nenaco is 97 percent owned by MPC.

Pangilinan, in an earlier interview with The STAR, disclosed that they are also considering the possibility of spinning off Nenaco separately from MPC.

Officials emphasized that at present, Nenaco still generates free cash of about P400 million. "Piltel was in a worse situation but we were able to turn it around," Pangilinan added.

During the first quarter of 2004, Nenaco reported a net loss of P15.6 million compared to a net profit of P10.5 million in the same period last year. The loss was due to reduced passengers and cargo carried during the period which, in turn, was due to the reduced number of vessels in service.

MPC acquired a majority stake in Nenaco in 1998 and during the period since, has infused both equity and assumed Nenaco debt in exchange for equity, in the aggregate amount of about P5 billion over the past six years.

According to Lim, the problem with Nenaco was the devaluation of its ships. Its capacity utilization was going down before because there was no upgrade. At the same time, the company has stronger competitors, he said.

While MPC did was some due diligence done before it purchased Nenaco, "it was a forced to good transaction because the government asked us to help in the shipping industry in order to get permission to invest in San Miguel Corp.," Pangilinan revealed.

"Give us credit for helping save the company. We are not after anyone in the industry, we just want to compete. We want to have peace and order in rehabilitating the company," he added.

Pangilinan also noted that the creditor banks do not stand to benefit if Nenaco goes under.

The Manila Regional Trial Court earlier granted Nenaco’s petition for an immediate suspension of debt payments, seen as the first step towards the implementation of the shipping firm’s rehabilitation program.

The court order "stays the enforcement of all claims, whether for money or otherwise...against the petitioner, its guarantors and sureties." The company has also been prohibited by the court from selling, encumbering, transferring, or disposing in any form any of its properties.

According to Nenaco, the purpose of the said stay order is to ensure the sanctity of its assets while the RTC considers its rehabilitation program and to prevent any creditor from attempting to gain advantage over others in an attempt to seize or attach any of the company’s assets. "Otherwise, it will be a fraudulent preference of credits," Pangilinan said in an interview Sunday.

Nenaco earlier said the filing was triggered by a debt payment dispute with Cebu-based Tsuneishi Heavy Industries Inc., a ship repair company 20 percent owned by another shipping firm, Aboitiz and Co. Inc.

Under a court-approved corporate rehabilitation program, Nenaco wants to reduce its obligations while preserving its assets for cash generation and future growth.

Lim also revealed that MPC is reviewing options for a repositioning of Nenaco in line with its proposed rehabilitation program.