Creditor-banks oppose court petition of Platinum Plans for debt relief, rehab

Creditor-banks of pre-need firm Platinum Plans Inc. have opposed the company’s court petition for suspension of debt payments and rehabilitation.

In the summary hearing conducted yesterday by the Makati Regional Trial Court, creditors led by East West Banking Corp., China Banking Corp. and Bank of Commerce posed their objection to Platinum Plans’ petition for debt relief.

The Securities and Exchange Commission (SEC) earlier asked the Makati RTC to dismiss Platinum’s petition for suspension of debt payments and rehabilitation as the pre-need firm’s liabilities already exceed its assets.

Based on the computations by the SEC’s Non-Traditional Securities Department, Platinum’s liabilities amount to P3.2 billion as against assets of P2.9 billion.

The SEC is also mulling the possibility of filing criminal charges against the erring officers and directors of the pre-need firm for alleged misappropriation of funds that led to the company’s downfall.

Administrative sanctions are also being prepared against the company for violation of the rules on the sale of pre-need plans. Among these violations include non-submission of its actuarial valuation report, financial statements, and collection and sales reports.

Based on SEC records, Platinum has an actuarial reserve liability (ARL) of P470.1 million as against trust fund assets of P192.76 million, resulting in a trust fund deficiency of P277.34 million. The company has also been found to have failed to remit monthly deposits to its trust fund, which is made up mostly of real estate.

The ARL is the present value of all current and future tuition availments. It is based on inflation, interest rates, and expected tuition increases, among others. A measure of how healthy a pre-need company is whether its trust fund is equal to or exceeds the ARL.

Platinum had sought reprieve on the payment of its debts to allow it to hammer out a viable recovery plan. It believes that given enough time it would be able to settle all maturing obligations.

In its petition, Platinum said it could settle only up to P75 million of its maturing obligations to plan holders. It intends to sell assets to raise funds to cover obligations to planholders.

Platinum is reportedly locked in negotiations with a Canadian firm that has offered to buy out the pre-need firm from the Salas family.

Platinum, however, said it remains uncertain whether a deal could be closed between the company and the prospective investor from Canada given the current controversies and the consequent operational and financial difficulties hounding it.

It said the prospect of getting a "white knight" will require a period for normal due diligence. "This is best done under a rehabilitation climate with the supervision of the court and receiver so that the terms and conditions that will be discussed can have legal stability and protection," Platinum said.

Platinum said getting a foreign investor will strengthen not only the company but restore credence and confidence in the pre-need industry as well.

According to the pre-need firm, existing long-term commitments of Platinum towards planholders will be better protected with new resources and management.