Uniwide appeals termination of rehabilitation proceedings by SEC

MANILA, Philippines - Uniwide Holdings Inc. is appealing the decision of a Securities and Exchange Commission (SEC) hearing panel terminating the rehabilitation proceedings of the debt-strapped warehouse club operator, arguing it has successfully paid almost 80 percent of its total liabilities.

In its appeal to the commission en banc, the SEC’s highest decision-making body, Uniwide said the hearing panel grievously erred and gravely abused its discretion in terminating rehabilitation proceedings, pointing out that the rehabilitation plan, which was earlier approved by the SEC, has generally been successfully and substantially implemented.

“The failure to achieve some of the objectives of the rehabilitation plan is not the fault of the Uniwide Group, and the same may still be implemented,” Uniwide said.

The SEC junked the third amendment to Uniwide’s rehabilitation plan after majority of the discount retailer’s creditors shot down the revised proposal for not being feasible, dodging hopes for the restoration of its business.

The Uniwide Group, owned by the Gow family, filed for the suspension of debt payments and rehabilitation with the SEC in June 1999 owing to liquidity problems as a result of the economic crunch and a failed business diversification. 

In its order, the SEC said it has lifted the order of suspension of debt payments against Uniwide after finding the rehabilitation plan not feasible and being opposed by approximately 66.27 percent of the group’s total secured creditors.

The total claims opposing the revised plan amount to P2.546 billion. “Clearly more than majority of secured creditors are opposing the revised agreement. This alone is sufficient cause to reject petitioners instant motion,” the SEC said in its order.

Among those that are opposed to the amended rehabilitation plan are Land Bank of the Philippines, Allied Bank, Philippine National Bank and East West Banking Corp.

Of Uniwide’s total outstanding debt of P5.53 billion, P3.15 billion is owed to secured creditors – Landbank, Equitable Bank, Rizal Commercial Banking Corp., Global Bank, Allied Bank, PNB, ING and a syndicate of banks.

The remaining P2.38 billion debt is owed to unsecured creditors consisting of trade suppliers, contractors, private lenders and non-trade suppliers.

The proposal to settle Uniwide’s outstanding debt with secured and unsecured creditors via dacion en pago of its Metromall property is not feasible, according to the SEC. The property is mortgaged to Allied Bank and PNB.

The SEC approved Uniwide’s second amended rehabilitation in December 2002 based on the group’s assumptions it could generate enough cash from retail operations to support its rehabilitation plan.

Debunking Uniwide’s claim that it is on the road to recovery, creditors argued that the rehabilitation case should be terminated since this has been dragging on for more than 10 years and Uniwide has not achieved the desired goals under the rehabilitation plan.

The SEC noted that from 2002 to 2009, Uniwide’s sales and total revenues steadily declined which resulted in huge losses annually. “Petitioners’ operations never yielded profit during the eight-year period, casting serious doubts on the capability of petitioners to return to their former position of successful operation and solvency,” the SEC said.

According to the SEC, Uniwide failed to achieve its projected sales target from 2003 onwards, pointing out the wide variance in projected and actual generated sales is too glaring.

At the time of filing its rehabilitation plan in 2001, Uniwide had secured debt of around P5.82 billion and was solvent as assets exceeded its liabilities. From 2003 to 2009, Uniwide’s total liabilities consistently surpassed total assets. To date, assets are almost depleted and amount only to P2.726 billion as against liabilities of P12.29 billion.