Formosa Power Supply Corp. (FPSC), a unit of Taiwan-based Formosa Heavy Industries Corp., will acquire a 15.2-percent interest in Trust International Paper Corp. (TIPCO) with the acquisition of P150 million worth of shares of the debt-ridden paper milling company.
Documents filed with the Securities and Exchange Commission show that TIPCO will issue 12.376 million shares to FPSC at P12.12 per share, pursuant to the terms of the paper miller’s rehabilitation program approved by the Pampanga Regional Trial Court in Jan. 31, 2006.
Under the agreement, FPSC has committed to subscribe to a total of P750 million worth of common shares of TIPCO over a period of five years or P150 million worth of shares every year. This is on the condition that TIPCO shall purchase at least 218 million kilowatt-hours of electricity for each year over the said period.
In the event that TIPCO purchases from FPSC is less than 218 million kwH of electricity in any year, FPSC shall reduce its subscription of the common shares of stock of the company for the said year in direct proportion to the amount of kilowatt-hours of electricity actually bought by TIPCO.
Incorporated on July 23, 1987, TIPCO manufactures newsprint and printing and writing paper for various media and book publishers in the country and the Asia-Pacific region. Its facilities are located at the Clark Special Economic Zone in Mabalacat, Pampanga with a manpower of 560 employees in 2007.
In approving the rehabilitation plan, the Pampanga RTC said the option of liquidating TIPCO would result in non-payment of unsecured creditors including trade suppliers, loss of jobs for a significant number of workers, loss of much-needed revenue of the municipality where the plant is located and the loss of substantial export earnings for the country.
Already operating on full capacity, TIPCO now accounts for about 53 percent of the estimated 100,000 tons of paper being used by the local publishing industry per year with balance shared by debt-ridden Picop Resources Inc. and other small paper producers.
The new equity will be used by TIPCO to boost its operations locally and abroad.
The Development Bank of the Philippines filed with the Court of Appeals a petition for review of the RTC order approving TIPCO’s recovery program. To date, the petition is still unresolved.
Last year, TIPCO widened its net loss to P487.07 million from a restated loss of P428.33 million as revenues fell to P5.04 billion from P5.44 billion.