Court of Appeals affirms Extelcom rehab ruling

MANILA, Philippines - The Court of Appeals (CA) has affirmed its ruling last year allowing rehabilitation of debt-ridden Express Telecommunications Co. Inc. (Extelcom) by junking the bid of Lopez-controlled Bayan Telecommunications Inc. (Bayantel) and Marifil Holdings Corp. to stop the Securities and Exchange Commission (SEC) from implementing the plan.

In a 21-page resolution penned by Associate Justice Arturo Tayag, the special former special 15th division of the appellate court stressed that petitioners BayanTel and Marifil failed to raise new arguments in their motion for reconsideration to warrant the reversal of its Dec. 16, 2008 decision.

Bayantel is an Extelcom major creditor while Marifil is a major stockholder.

In the assailed ruling, the CA dismissed Bayantel and Marifil’s petition for review of the order issued by Regional Trial Court Judge Antonio Eugenio Jr., approving Extelcom’s rehabilitation initiated by Trans Digital Excel, Inc. (TDE), one of Extelcom’s major creditors for failure of petitioner to seek relief from the appeals court within the 15-day reglementary period under Rule 43 of the Rules of Court.

As for the merit, the CA stressed that the SEC did not err in approving the rehabilitation plan, which has converted Extelcom’s debts into equity.

It noted that the TDE-initiated rehabilitation plan was far more effective that the alternative rehabilitation plan being proffered by the petitioners, where Bayantel would partner with Extelcom to use the 850 megahertz frequency band for 3G [third generation] services.

The CA stressed that the debt-to equity conversion has resulted in Extelcom’s P9.18-billion debts and capital deficiencies being wiped out based on the report of the rehabilitation receiver.

The appeals court also noted reports that the TDE was in talks with San Miguel Corp. for the sale of 60 percent of its stake in Extelcom “proves that it is now viable enough to attract investors.”

“The entry of SMC may reasonably increase the value of the present shareholder equity in Extelcom, thereby enabling both shareholders and creditors alike to potentially realize additional value from their commonly reduced shareholdings and credits,” the CA said.

“It may be added that no other shareholder or creditor questioned the rehabilitation plan, lending credence to the conclusion that the court-approved rehabilitation plan is fair and equitable and is the most expeditious manner by which Extelcom may be rehabilitated,” it added.