Malaysia’s Guoco group eyes entry into shopping mall business in RP

Prime Orion Philippines Inc. (POPI), an investment holding company associated with the Guoco Group of Malaysia, is planning to go into retailing through the establishment of a shopping mall to improve its cashflow.

Through its real estate subsidiary Tutuban Properties Inc., POPI hopes to put up a department store or a supermarket to take advantage of the anticipated increased consumer spending. The planned venture was disclosed by POPI to the Securities and Exchange Commission as it requested opinion on whether it is considered a foreign investor and can engage in retail trade.

POPI, the parent company of TPI, is 26.72 percent foreign owned.

As of April 19, 2004, POPI’s paid-up capital amounts to P2.9 billion.TPI, on the other hand, has a paid-up capital of P200 million. It is engaged in the business of leasing commercial stalls.

But the SEC has ruled that TPI’s planned venture into retail trade is restricted since the 26.72 percent foreign equity participation of POPI in TPI is considered a foreign investment.

The SEC further said that while the proposed corporation is considered a Filipino corporation, it is not qualified to engage in any business reserved by the Constitution or other special laws solely to Filipino citizens.

POPI (formerly known as Guoco Holdings Phils. Inc.) is engaged in real estate and property development, manufacturing and distribution of ceramic tiles, construction-related materials, provision of financial services and hotel project and planned infrastructure development. It also owns the local manufacturing operations of Pepsi Cola.

POPI, however, is working on the reduction of 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.

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.

Apart from this, POPI is in talks with a potential strategic investor which 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 creditors banks of LCI for the restructuring of debts.

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.

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.

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.