THERE’S trouble brewing at the carpark.
UST wants to take over the management of the P247-million building after its private builder, Selegna Holdings Corp., ran into alleged financial difficulties that prompted the company to seek financial rehabilitation from the courts.
But the Court of Appeals has rejected Selegna Holdings’ plan as a “mere ploy” and a “last-ditch effort” to evade creditors now going after its assets.
Rector Fr. Rolando de la Rosa, O.P. said in an interview that UST wanted to take over the Multi-Deck Parking Building – completed in December 2005 under a 15-year build-operate-transfer contract – but Selegna Holdings was able to get a temporary restraining order. (See related story below.)
Last July 6, the Supreme Court upheld the Court of Appeals’ decision but Selegna Holdings filed a motion for reconsideration on August 25. The company assailed the appeals court, saying it junked the rehabilitation plan based on “technical defects” as if it were “a dirty baby thrown away instead of being given a bath.”
UST suspects that Selegna Holdings wants to keep managing the carpark even after the 15-year contract period – or beyond 2020 – to repay old debts, in apparent violation of the deal signed in 2004.
Under the contract, carpark revenues must go straight to Metrobank, which financed the construction, with UST getting P1 million annually in royalties. UST has deemed Selegna Holdings in default of the loan payments, and under the contract, may take over management before the expiration of the 15-year deal.
It turns out that Selegna Holdings has a heavy debt burden, running to the courts to seek corporate rehabilitation on October 27, 2006, or less than a year after finishing the carpark’s construction.
The real estate firm’s bid to restructure what it claimed were P842 million in debts – most of which had nothing to do with the carpark project – was foiled by the Regional Trial Court of Makati and the Court of Appeals, in separate rulings dated May 31, 2007 and October 15, 2008, respectively.
Financially “distressed” corporations use corporate rehabilitation proceedings to revive business by suspending debt repayments and rescheduling them. This is the same process being undertaken by failed pre-need firms College Assurance Plan and Pacific Plans.
It was unclear whether UST officials knew of Selegna Holdings’ situation when they awarded the build-operate-transfer or BOT contract to the Makati-based firm in 2004.
Selegna Holdings’ 2006 petition before Branch 149 of the Makati trial court claimed it was still solvent but unable to pay debts on time, citing “financial drain” because of events a decade earlier – the 1997 Asian financial crisis and debts incurred for the Expo Pilipino theme park built by sister company Asian Construction Development Corp. (AsiaKonstrukt) for the country’s centennial celebration in 1998 (see related story).
Selegna Holdings said housing projects in Batangas and Cavite were shelved “[due] to high cost of money combined with weak demand for housing brought about by the Asian financial crisis.”
It also claimed to have lent AsiaKonstrukt P80 million to help finish the graft-ridden Expo Pilipino, a pet project of the Ramos administration that became a white elephant under the Estrada administration.
AsiaKonstrukt, in turn, claims the government has yet to pay it some P1.5 billion for the centennial project.
Selegna Holdings disclosed in court that it owed P37 million to the International Exchange Bank, P31 million to the central bank which had taken over the shuttered Bankwise, P26 million to RCBC Savings Bank, P11 million to the United Coconut Planters Bank (UCPB), and more than P7 million to other creditors, with the money used to buy real estate and fund “working capital.”
The firm also owes Metrobank P247 million for the UST carpark. Out of this, P107 million was guaranteed by the University, which must shoulder payments to Metrobank if Selegna Holdings defaults. Last year, UST lawyers told the Court of Appeals that Selegna Holdings “has already defaulted in the payment of its obligation to Metrobank.”
The Supreme Court has actually ruled versus Selegna Holdings. The firm’s August 25 motion for reconsideration cited a court resolution dated July 6 that said there was no “reversible error” in the ruling of the Court of Appeals.
Under its rehabilitation proposal, Selegna Holdings wanted to prioritize payments to Metrobank, including interest, while the rest of the creditors would be paid in kind, or “dacion en pago,” and must waive interest and penalties.
Courts have ruled repeatedly that creditors of a corporation facing bankruptcy should be on equal footing.
UST lawyers are opposing the plan since “free cash flows” from the carpark business would be used to pay other creditors who do not want in-kind payments, after the Metrobank loan is fully paid.
“The proposed Rehabilitation Plan submitted by [Selegna Holdings] is unfair and unjust as it will prevent UST from enjoying its own real property even beyond the concession period under the BOT contract,” said the comment/opposition filed by the Divina & Uy Law Offices, UST’s counsel, with the Court of Appeals last year.
‘Lack of good faith’
The appeals court, in a resolution last February 5, said Selegna Holdings’ petition for corporate rehabilitation was “a mere ploy.”
“The petition for rehabilitation was resorted to by [Selegna Holdings] to prevent creditors from enjoying foreclosed properties and prevent forthcoming foreclosures,” said the resolution written by Associate Justice Teresita Dy-Liacco Flores.
Selegna Holdings also displayed “lack of good faith,” the appellate court said, pointing out that debts to creditors other than Metrobank were actually understated by hundreds of millions and that the company had lent AsiaKonstrukt millions of pesos “despite its own need for funds.”
The appeals court also pointed out that Selegna Holdings’ shareholders, the family of contractor Edgardo Angeles, was claiming to have advanced P351 million to the company without “credible proof.”
It was “incredulous” for a firm in “dire financial straits” to require shareholders to shell out P351 million on top of several bank loans and yet lend a sister company P80 million, the October 2008 decision said.
Makati Judge Cesar Untalan, in his 2007 ruling, also argued that Selegna Holdings had no money to begin with and even had to get a loan from Metrobank to build the UST carpark – from the cost of design all the way to construction.
“It means indeed that [Selegna Holdings] has no available funds to finance this kind of business venture,” Untalan said.
Restrict free parking
Selegna Holdings’ plan would have required UST to “restrict in-road parking in campus” to “maximize” carpark revenues, aside from yearly rate increases.
Throughout the 15-year BOT contract, the carpark is expected to generate P785 million in cash from parking slots and leases on commercial spaces, considering UST’s captive market of 40,000 students, court records showed.
Operator gets TRO, mum over dispute
CARPARK operator Selegna Holdings Corp. is keeping mum on UST’s bid to take over the operations of the Multi-Deck Parking Building, citing a “status quo order” from a Manila trial court.
In a letter to the Varsitarian dated October 1, Ruben Lopez, legal counsel for Selegna Holdings and its president Edgardo Angeles, said he had told his client to “refrain from being interviewed or giving any further information or clarification to anyone about the UST Multi-Deck Carpark.”
The Varsitarian had sought Angeles’ comment on court decisions firmly rejecting his firm’s corporate rehabilitation plan, where it could be discharged of obligations to a number of creditors, including UST.
Lopez said Selegna Holdings “sought the intervention of the court to interpret or construe [its built-operate-transfer contract with UST],” after UST sent a notice to terminate the deal.
In an order dated May 29, the Manila Regional Trial Court tasked UST, Selegna Holdings, and Angeles to observe the “status quo.”
“By agreement of adverse counsels, the prayer of the petitioners (Selegna Holdings and Angeles) for the issuance of a preliminary injunction will be deemed submitted for resolution,” the court said.
“In the meanwhile, so as not to render moot and academic resolution on the prayer of the petitioners for the issuance of a preliminary injunction, and after considering the pleadings filed by the parties (UST, and Selegna Holdings and Angeles), a Temporary Restraining Order is hereby granted to the petitioners to maintain the status quo of the parties pending the determination of whether a preliminary injunction will be granted or not,” the order read. Danielle Clara P. Dandan
