Ramcar trims debt to P500M, climbs out of receivership

The Ramcar Group, a manufacturer of a local line of batteries including Motolite and Oriental, is now out of receivership following the successful implementation of a court-approved rehabilitation program which resulted in the reduction of its debt to less than P500 million from a high of P7.6 billion in 2001.

A local court issued an order terminating rehabilitation proceedings after the terms of the second amended rehabilitation plan, as approved on August 23, 2003, were fully and successfully implemented by the Ramcar Group and its creditors.

This means that Ramcar can resume normal business operations under the management of the owners of the Ramcar Group.

Court-appointed receiver Fortunato Cruz attributed the successful implementation of the recovery program to the swap of personal assets of the company’s shareholders to settle debt and the cooperation of creditor banks.

The Ramcar Group sought debt reprieve in December 2001. After the court approved the second amended rehabilitation plan, Ramcar along with its affiliates and shareholders, entered into dacion en pago agreements with all of its creditor banks.

Dacion en pago refers to payment in kind using assets owned by shareholders or the company.

Out of a total debt of P7.6 billion, about P6.1 billion-worth in unsecured bank debts was settled via dacion en pago while the P1.5 billion of secured debt, on the other hand, were restructured.

As of end-last year, less than P500 million of the secured debt of the company remains outstanding.

Company officials said the reduction of debt to a manageable level will allow Ramcar to continue its modernization and expansion program and put it back on a solid financial footing.

Ramcar, which is controlled by the Agustines family, was adversely affected by the 1997 Asian financial crisis which caused interest rates to skyrocket and the peso-dollar exchange rate to reach new lows.

Cruz said that the Ramcar Group is committed to pursue the business plan it submitted to the court.

The plan involves the following: the immediate recovery of lost domestic market share; the pursuance of an expansion and modernization program so as to reduce cost and improve quality; the taking of a far more aggressive pace in the expansion of its export business in order to compete internationally; and the reinvestment of all internally generated funds on capital expenditures.

Due to the conservative approach it has taken, Ramcar was able to weather the surge in the prices of commodities since 2004, particularly lead prices, which had more than doubled since 2003, and not to mention the increased cost of energy, fuel, and labor.

As of end-2005, peso sales volume grew by 55 percent, unit production volume by 37 percent, and export volume by 60 percent. Warranty returns were down to under one percent compared to the international industry standard of three percent.

The Ramcar Group has also one of the most advanced and integrated manufacturing facilities in the world, the direct result of an unrelenting modernization program. This is further confirmed by its very low warranty return rate and the numerous awards given to it by Original Equipment Manufacturers.