James Packer drops plan to buy CAP stake in Bank of Commerce

Arctic Capital, a private equity fund owned by Australian gaming and media tycoon James Packer, has backed out of its plans to acquire the College Assurance Plans Group’s stake in mid-sized lender Bank of Commerce, according to industry sources.

Informed sources said Arctic Capital withdrew its plans last Sept. 30 at the height of the sub-prime crisis in the US and on fears that BoC had exposure to the Lehman Brothers’ collapse.

Records from the Bangko Sentral ng Pilipinas show that BoC has an exposure of $15 million.

Another source said there wasn’t enough time for Arctic Capital to do further due diligence on BoC.

The aborted deal, which was already approved by the Monetary Board, would have allowed the CAP Group to raise around P1 billion. The CAP Group comprises pre-need firm CAP, CAP Retirement and CAP Pension.

With Arctic Capital’s withdrawal, the CAP Group is reportedly entertaining two new groups (local and foreign) that have expressed interest to purchase its 19- percent stake in BoC.

The group’s stake in BoC represents two board seats.

The sale forms part of CAP’s approved revised rehabilitation plan which calls for the disposal of non-core assets to pay benefits of planholders.

CAP filed for corporate rehabilitation before a Makati Court after experiencing problems in settling obligations to planholders. Cited as reason for its liquidity problem is the stringent rules imposed by the Securities and Exchange Commission, which regulates the pre-need industry.

BoC is in need of additional fresh equity for investments in technology and branch network expansion nationwide and to boost loan portfolio.

The San Miguel Group is hoping to complete the acquisition of a controlling stake in Bank of Commerce on or before Nov. 15, 2009.

San Miguel Properties Inc. (SMPI), and its retirement fund San Miguel Corp. Retirement Plan, currently own 34.3 percent of BoC. The group, however, is infusing an additional P2 billion into BoC to increase its stake to 51 percent.

The new investment will bring the San Miguel group’s total investment in BoC to P4 billion, which in turn, will raise the bank’s total capital accounts to approximately P10.42 billion.

BoC is seen to serve as SMPI’s retail arm for financing of its various residential condominium projects.