VMC’s successful rehab
Credit to Author: EMETERIO SD. PEREZ| Date: Thu, 24 Jan 2019 16:19:08 +0000
Businessman Lucio Tan may have been the business tycoon who is mainly responsible for the successful rehabilitation of Victorias Milling Co. (VMC). How about the company’s public stockholders who were made to sacrifice too, because they held and still own today 447.281 million VMC common shares, or 16.31 percent of 2.742 billion outstanding VMC common shares?
The question may be true with all the rehabilitation cases that were transferred to regular courts designated by the Supreme Court. In the case of listed companies, their public stockholders and their holdings should be the main concern of government regulatory authorities, including the courts.
Being public investors may not be easy in this country. As Due Diligencer has long been pointing out, they never enjoy any kind of access to the board, which acts as the policy-making body. Who among the directors enjoying such access honestly report everything taken up inside the board room?
This is not to accuse insiders, who are either executives or mere employees of listed but not necessarily public companies. Some of them are responsible enough to understand the plight of the public investors, who may not be as rich as the majority stockholders although a few of them may even be richer.
Public stockholders
Going back to VMC, the group or family of tycoon Mr. Tan may have succeeded in rehabilitating the company. The public stockholders, on the other hand, may have understood the predicament of Mr. Tan in taking over a losing company. How much did he infuse into VMC?
Based on VMC filings posted on the website of the Philippine Stock Exchange, “the group currently holds six loans.” Two of these loans represent “short-term loans amounting to P250 million and P50 million with annual interest of 2.50 percent payable on Nov. 2, 2016 and 3 percent payable on Jan. 25, 2017,” according to Note 14 of VMC’s unaudited quarterly financial.
VMC, according to the same quarterly filing, also had “long-term loans amounting to P850 million with annual interest of 4.625 percent,” which, it said, “are payable quarterly beginning March 14, 2018.”
At the same time, VMC said “borrowing costs arising from the loans amounting to P18.7 million was capitalized in 2016. Borrowing costs not capitalized and charged to profit and loss amounted to P6.2 million.”
According to the same footnote, “the debt covenants require the group to maintain a minimum current ratio and debt service coverage ratio at 1.2 and a maximum debt to equity ratio of 3. As of Aug. 31, 2016, the group is compliant with these debt covenants.”
Annual meeting
VMC will hold at 8 am of Feb. 6, 2019 its annual stockholders’ meeting. Venue is Victorias Golf & Country Club in Victorias City, Negros Occidental, a definitive information statement (DIS) said.
Belonging to the group of companies owned by Mr. Tan, VMC may be willing to answer during said annual meeting any and all questions related to the company’s plans.
For instance, anyone among VMC’s public stockholders may ask the company’s management “why there has been no declaration of dividends in the last five years” despite its retained earnings amounting to P3.688 billion as of Nov. 30, 2018.
There are other issues that Mr. Tan may want to explain thru his representatives. Aside from retained earnings, he may be asked – again thru his men – what for is the amount of retained earnings if VMC public stockholders are denied their right to dividends?
Of course, as known to the public stockholders, they are mainly responsible in enabling businesses to save on taxes paid or due the Bureau of Internal Revenue.
By listing either their entire outstanding common shares or only some of them, stock corporations assume the identity of being listed stocks even if getting listed does not necessarily mean they are public.
Will anyone among the public stockholders dare VMC to fully disclose its deals with creditor banks? Just asking.
esdperez@gmail.com
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