GIHL completes P1-B downpayment to NSC

Global Infrastructure Holdings Ltd. (GIHL) has remitted in full its P1-billion downpayment for National Steel Corp. (NSC), said Sushant Das, president of GIHL’s parent firm Global Steelworks International Inc. (GSII).

With the payment, Das said GIHL can now proceed with the acquisition of NSC, including the takeover of the plant’s assets and operations.

GIHL has been rehabilitating NSC’s Iligan plant since February this year and has reportedly completed 60 percent of the works. In fact, Das said the hot mill operation, one of the plant’s main line, is expected to resume soon.

He said once NSC starts producing, it is expected to start exporting an initial 5,000 metric tons of cold rolled coil to China.

Das said he expects the remaining agreements on the sale of NSC would be signed by Oct. 10. The initial Asset Purchase Agreement was signed last Sept. 10 while two other agreements – the Omnibus Agreement and the Sharing Agreement – have yet to be signed pending two other conditions that NSC’s creditor banks have to complete.

The creditor banks still have to secure a Certificate of Eligibility (COE) from the Bangko Sentral ng Pilipinas (BSP) on their compliance with the Special Purpose Vehicle (SPV) Law since the NSC deal is eligible to avail of incentives under this law.

By registering the deal under the SPV, the banks can amortize over a 10-year period any losses they may incur from the deal.

Likewise, an agreement also has to be reached between the secured creditors of NSC and the National Power Corp. (Napocor) on how NSC’s outstanding liabilities to Napocor have to be paid.

Only after those two conditions have been met will the Omnibus and Sharing Agreements could be signed. These agreements cover the arrangement for GIHL’s payments to the creditor banks of the total P13.25-billion selling price for NSC.

The agreements would also outline how payment among creditor banks will be distributed, as well as other obligations to the City of Iligan, Napocor and the NSC liquidator.

Proceeds of the sale would first be paid out to the City of Iligan to settle the P171.2 million in delinquent real estate taxes and P270 million to the Napocor.

But even before the documents could be signed, GIHL has completed the required downpayment of P1 billion or $17.857 million. GIHL has already deposited in escrow $6.5 million as part of the downpayment.

GIHL also has another P250 million standby letter of credit which is part of the security arrangement in the event that GIHL does not deliver the payment.

The creditor-banks of NSC and GIHL signed a memorandum of agreement last Jan. 29 which laid out the commercial terms of the agreement.

The secured creditors of NSC include the Philippine National Bank, China Banking Corp., Metropolitan Bank and Trust Co., the Land Bank of the Philippines, and Rizal Commercial Banking Corp..

The five banks represent 64.32 percent of the total outstanding exposure of NSC to the banking system, valued at P13.792 billion.

GIHL will pay the secured creditors and the original NSC stockholders the amount of P13.25 billion over an eight-year period under a negotiated schedule.