In the Matter of the Petition for Declaration of Suspension of Payment, Formation and Appointment of a Rehabilitation Receiver/Committee and Approval of a Rehabilitation Plan

January 13, 2010 SPECIAL HEARING PANEL SEC CASE NO. 06-99-6340 IN THE MATTER OF THE PETITION FOR DECLARATION OF SUSPENSION OF PAYMENT, FORMATION AND APPOINTMENT OF A REHABILITATION RECEIVER/COMMITTEE AND APPROVAL OF A REHABILITATION PLAN UNIWIDE SALES INC., UNIWIDE HOLDINGS INC., NAIC RESOURCES AND DEVELOPMENT CORP., UNIWIDE SALES REALTY AND RESOURCES CORP., FIRST PARAGON CORPORATION., AND UNIWIDE SALES WAREHOUSE CLUB INC. , petitioners . RESOLUTION This resolves the following: (1) Petitioners' Motion to Approve Revised Third Amendment to the Group Rehabilitation Plan (Revised TARP) dated 22 September 2008; (2) Motions of various parties to declare petitioners' rehabilitation plan "not feasible" and to terminate this rehabilitation case. 1 Good Intention, Bad Outcome Petitioners are affiliate companies under the common ownership of the Gow family loosely called Uniwide Group of Companies . They are involved in retail business, real estate and franchising of Uniwide trade name. At the time of filing of this petition on 25 June 1999, petitioners operate eight warehouse clubs and two department stores, with total assets of PhP19.864 billion and total liabilities of PhP11.101 billion. Petitioners have ambitious goals in seeking rehabilitation to fully pay all their debts, stabilize their operations and take advantage opportunities for growth. But, over the past decade, despite changes in plans and strategies, petitioners' business consistently resulted in gargantuan losses. By the end of 2008, petitioners operate only five warehouse clubs and one department store. Their assets are almost depleted, while their liabilities ballooned. Thus, as of 30 September 2009, petitioners have only total assets of PhP2.726 billion. On the other hand, their total liabilities further increased to PhP12.292 billion 2 2 despite being in state of suspension of payment since 29 June 1999. TASCDI The conclusion is inescapable. Petitioners have metamorphosed from being "solvent but distressed" 3 enterprise to "technically insolvent" 4 and then to unmistakably "insolvent" 5 conglomerate. Their story is no different from other overreaching business empires which ran up ruinous debts that must one day be paid. What Went Wrong? On 25 June 1999, petitioners filed with the SEC a Petition for Declaration of Suspension of Payment, Formation and Appointment of a Rehabilitation Receiver/Committee and Approval of a Rehabilitation Plan. This was prompted by the adverse impact on petitioners' finances allegedly due to slow down in sales, slow collection of receivables, high interest payments and mounting debts accumulated because of aggressive expansion. On 29 June 1999, the SEC approved the petition. On 18 October 1999, the Interim Receivership Committee submitted petitioners' rehabilitation plan. The plan was anchored on the following principles: return to core business of retailing; debt reduction via cash settlement and dacion en pago ; loan restructuring; waiver of penalties & charges; freezing of interest payments; restructuring of credit of suppliers, contractors and private lenders. On 14 February 2000, the Interim Receivership Committee submitted petitioners' Group Amended Rehabilitation Plan (GARP). The amendment was necessitated by the planned entry of strategic investor Casino Guichard Perrachon (Casino). Casino was envisioned to infuse PhP3.57 billion in fresh capital. On 11 April 2001, the SEC approved petitioners' GARP. On 11 October 2001, the Interim Receivership Committee filed with SEC the Second Amendment to the Group Rehabilitation Plan (SAGARP). The change was due to Casino's decision not to pursue its investment in Uniwide. On 23 December 2002, SEC approved the SAGARP. On 11 July 2007, petitioners submitted to SEC a Third Amendment to the Group Rehabilitation Plan (TARP) for approval. But before SEC can act on TARP, petitioners on 29 September 2008 filed a Revised Third Amendment to the Group Rehabilitation Plan (Revised TARP) for approval. DcITHE On 17 September 2009, the newly constituted Special Hearing Panel directed petitioners to show cause why this rehabilitation case should not be terminated, while the creditors were ordered to manifest whether or not they still want the rehabilitation proceedings to continue. The Revised TARP of Uniwide We shall address first the Motion to Approve Revised TARP . The following are the salient features of the Revised TARP : 1. Petitioners has still outstanding debt amounting to P5.533 billion. Of that amount, P3.155 billion is owed to secured creditors Land Bank, EBC, RCBC, Global Bank, Allied Bank, PNB, ING Bank and syndicate banks. The amount of P2.377 billion is owed to unsecured creditors consisting of trade suppliers, contractors, private lenders and non-trade suppliers. 2. Settlement of outstanding debt shall be through dacion en pago of Metromall property owned by Uniwide. Petitioners claim that the Metromall property has an appraised value of P3.067 billion. 3. The unsecured creditors shall be paid via dacion en pago of a portion of Metromall property. Transfer of ownership shall be through the formation of a special purpose company (SPC). The shares of SPC shall then be distributed to the creditors as payment for the outstanding debt. The total amount to be settled with unsecured creditors is P2.327 billion, while the value of the portion Metromall property to be transferred to unsecured creditors is P800 million. Hence, the dacion amount shall fully settle the total unsecured debt at 65% discount. [Under the SAGARP, unsecured creditors are supposed to be paid through convertible notes and cash payments from retail operations.] 4. The secured creditors (PNB, Allied Bank, EBC) shall also be paid via dacion en pago of Metromall property. The total debt of petitioners to said creditor banks amounts to P1.737 billion or P1.630 billion if the premium of 20% given to EBC is excluded. DEIHAa 5. Petitioners will rehabilitate the retail operations in order to save 1,500 direct jobs and 10,000 to 15,000 indirect jobs. Retail business will continue to cater to "C" and "D" income bracket market. Uniwide will increase its daily-per-store sales. Thus, Uniwide will solicit support of trade suppliers for additional or longer credit terms. It will improve efficiency on inventory management to enhance turnover. It will improve gross profit margin by enhancing inventory mix to increase non-supermarket items which yields higher gross profit margin. It will maintain minimum operating expenses. The Revised TARP is Rejected by Creditors We reviewed the comments and manifestations of creditors on the proposed amendments and the implementation of the rehabilitation plan. The following are their views: Allied Banking Corporation opposes petitioners' Motion to Approve Revised TARP. The proposal compels the bank to surrender its mortgage rights to other creditors who are erstwhile unsecured or hold different collaterals. The bank opposes the valuation of Metromall property in the amount of P3.067 billion. 6 LNC SPV-AMC Corporation opposes petitioners' Motion to Approve Revised TARP and prays that the SARP, TARP and Revised TARP be declared "not feasible". The appraisal report indicates that the Metromall property has fair market value of only P660 million as of 11 April 2008. The statement of account issued by the City Treasurer of Las Pias City reveals that the Metromall property has back taxes in the amount of P327 million. In addition, the estimated transfer fee, documentary and gross receipt taxes will reach P260 million. Since under the proposal, the creditors will shoulder the back taxes and expenses, LNC will end up inheriting debt of P423 million. 7 Land Bank of the Philippines states that petitioners and Land Bank entered into dacion en pago in settlement of P686 million debt. The balance is about P36 million. Unexpectedly, Uniwide filed a case with RTC Paraaque City to nullify the dacion agreements which case is pending up to this date. Therefore, if the agreements will be eventually nullified, then Land Bank will revert back to its position as secured creditor with total claim of P723 million. Why then did Uniwide indicate in its progress report that it has settled its P686 million debt with Land Bank? 8 ITcCSA Philippine National Bank not only opposes the amendment of the rehabilitation plan. It reiterates its prayer for the termination of the instant rehabilitation proceedings. Petitioners' debt with PNB is secured by real estate mortgage over Metromall which PNB shares with Allied Bank on a pari passu basis. PNB opposed and is opposing the proposed dacion en pago of Metromall as payment for other creditors claims as it curtailed PNB/s right as mortgagee. 9 EastWest Banking Corporation not only opposes the amendment of the rehabilitation plan. It moves for termination of this rehabilitation case. 10 LG Electronics Philippines Inc. finds Uniwide's proposal to settle obligations with unsecured creditors unrealistic and not feasible. 11 Union Empire Inc. prefers to be paid in cash and prays to hasten the release of P7 million cash earmarked for cash payment to unsecured creditors. 12 Based on the foregoing comments, the pertinent rules and our factual findings, we cannot give due course to petitioners' Motion to Approve Revised TARP, as explained in the succeeding discussion. The Revised TARP is Opposed by Majority of Secured Creditors 1. The proposed modification of petitioners' rehabilitation plan is strongly opposed by majority of secured creditors . The following are the pertinent provisions of SEC Rules of Procedure on Corporate Recovery : "Section 2-8. Decision by creditors. Whenever a number of creditors is required in these Rules for a decision to be taken, for an act to be done, or for the rejection of a proposal, the said number shall refer to the total amount of their claims counted separately by each class of creditors . Section 2-10. Classification of creditors. For purposes of these Rules, creditors shall be classified into secured or unsecured. Section 4-20. Approval of the Rehabilitation Plan. No Rehabilitation Plan shall be approved by the Commission if opposed by a majority of any class of creditors . The Commission may, upon motion, however, override said disapproval if such is manifestly unreasonable. The Rehabilitation Plan shall be deemed ipso facto disapproved and the petition dismissed if the Commission fails to grant the motion to override within thirty (30) days from the time it is submitted for resolution. DaTICE Section 4-23. Alteration or modification of the Rehabilitation Plan. An approved Rehabilitation Plan may, on motion, be altered or modified if, in the judgment of the Commission, such alteration or modification is necessary to achieve the desired targets or goals set forth therein. No alteration or modification of an approved Rehabilitation Plan shall be allowed if opposed by a majority of any class of creditors unless such opposition is manifestly unreasonable." Petitioners still owe their secured creditors approximately PhP3.155 billion. The outstanding obligation of petitioners to secured creditors and the claims of secured creditors opposing the Revised TARP are shown below: Secured Creditors Amount * Claims Opposing (PhP Million) the Revised TARP Philippine National Bank 832.96 832.96 Allied Bank 360.65 360.65 Land Bank 36.91 36.91 LNC SPV-AMC Corp. (successor of EBC) 493.42 493.42 RCBC 471.42 Global Bank 50.51 ING Bank 171.29 Syndicate Banks (net of BPI) 738.55 including East West Bank [P100 M] 100.00 TOTAL 3,155.71 1,823.94 Percentage 100% 57.80% + Land Bank (dacion amounts) 686.00 686.00 TOTAL 3,841.71 2,546.00 100% 66.27% * Third Quarter Report of Rehabilitation Receiver dated 13 October 2009. Based on the above data, it is clear that secured creditors holding about PhP1.823 billion of the PhP3.155 billion secured debt are against the revision of the rehabilitation plan. The claims opposing the Revised TARP represent at least fifty seven percent (57%) of the outstanding secured debt. Those against the modification of the rehabilitation plan include secured creditors Allied Bank, Land Bank, LNC SPV-AMC Corp. as well as PNB and East West Bank since these two banks preferred outright termination of the rehabilitation proceedings. AcHEaS But we must go further. Land Bank brought to our attention that petitioners have repudiated the dacion and restructuring agreements they executed with the bank from 2002 to 2004. In 2007, petitioners filed with RTC Paraaque City a case to nullify said contracts. 13 The subject agreements are supposed to settle PhP686 million debt of petitioners with Land Bank. It is therefore misleading for petitioners to claim that they have substantially paid their obligation with Land Bank and that they owe Land Bank only PhP36.91 million. As it stands, petitioners' unsettled debt with Land Bank is approximately PhP723 million. Now, if we use the amount of PhP723 million in computing petitioners' total debt with secured creditors, the total outstanding secured debt of petitioners is PhP3.842 billion. On the other hand, the total claims opposing the Revised TARP will amount to PhP2.546 billion. This means that creditors holding approximately sixty six percent (66.27%) of the secured claims are against the revision of the rehabilitation plan. Clearly, more than the majority of secured creditors are opposing the Revised TARP. This alone is sufficient cause to reject petitioners' instant motion. The Revised TARP is Not Feasible 2. The proposal to settle petitioners' outstanding debt with secured and unsecured creditors via dacion en pago of Metromall property is not feasible . Under the Revised TARP , petitioners intend to settle their debt with secured and unsecured creditors via dacion en pago of Metromall property. The ownership of Metromall property will be transferred to Allied Bank, PNB, LNC SPV-AMC Corp. and the group of unsecured creditors. The problem is that the Metromall property is mortgaged to Allied Bank and PNB and these banks strongly oppose any arrangement that will result in the surrender of their mortgage rights over Metromall property. As the argument goes, these banks have property rights under their existing security arrangements with petitioners that cannot be put asunder without their consent or unless in exchange for valuable consideration that preserves at least the value of their property rights. Allied Bank and PNB reject the proposal of petitioners to settle their debt with LNC SPV-AMC Corp. and unsecured creditors through dacion of Metromall property. Besides, even LNC SPV-AMC Corp. insists that the proposed dacion of Metromall property is not feasible and rejects the Revised TARP as well. HEASaC Dacion en pago is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking partakes of the nature of sale, that is, the creditor is really buying the property of the debtor, the payment for which is to be charged against the debtor's debt. As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. Being a form of contract, the dacion en pago agreement cannot be perfected without the consent of the parties involved. 14 Certainly, we cannot compel the creditors to agree to the dacion en pago proposed by petitioners. The dacion en pago program is not compulsory in nature. The terms of the rehabilitation plan such as dacion en pago scheme, waiver of interest, penalties and related charges are mere proposals of petitioners for the creditors to accept. 15 In this case, the prospective parties to dacion agreements have manifested their vehement objection to the proposed dacion en pago . Surely, such dacion en pago will never materialize. Similarly, it is pointless for us to approve this Revised TARP since petitioners will be signing the instruments by their lonesome. Petitioners will have no counterparties in the proposed dacion agreements. Unless the concerned creditors participate, this process will be futile and irrelevant. The Opposition to the Revised TARP is Reasonable 3. The objection of creditors to the Revised TARP is justified. Land Bank rejects the Revised TARP because petitioners did not comply with the terms of the existing rehabilitation plan. Recall that from 2002 to 2004, Land Bank and petitioners executed dacion and restructuring agreements to settle petitioners' PhP686 million debt with the bank. It must be stressed that the dacion and restructuring arrangements are the proposals of petitioners and not of the creditors. Surprisingly, in 2007, petitioners sought the annulment of said agreements and the court enjoined Land Bank from disposing of the dacioned properties. Indeed, Land Bank has basis to doubt petitioners' trustworthiness in commercial transactions. Allied Bank, PNB and LNC SPV-AMC Corp. oppose the Revised TARP because they do not agree to the 1999 valuation of Metromall property. For its guidance, LNC SPV-AMC Corp. engaged Royal Asia Appraisal to conduct re-appraisal of Metromall. Based on the appraisal report dated 11 April 2008, the fair market value of the land appears to have dropped from PhP1.308 billion to PhP660 million. LLjur We note that a creditor may move for re-appraisal of asset if it believes that it does not have adequate protection over the property securing its claim. Under the rules, a creditor is considered lacking protection if it can be shown that the depreciation of the property is increasing to the extent that the creditor is under secured. 16 Presumably, with this in mind, the former Hearing Panel granted the motion for re-appraisal of Metromall property. 17 Nonetheless, petitioners are adamantly opposing the re-appraisal despite the executory nature of the Order. Interestingly, some of petitioners' accounts with creditors are still subject to reconciliation. 18 So, if some claims are subject to adjustment, why would petitioners resist the re-appraisal of Metromall property? LNC SPV-AMC Corp. likewise disclosed that the Metromall property owes Las Pias City back taxes in the amount of PhP327 million. In addition, the estimated transfer fee, documentary and gross receipt taxes for the dacion will reach PhP260 million. Since under the dacion en pago scheme, the creditors will shoulder the back taxes and expenses, LNC SPV-AMC Corp., explains that it will actually end up inheriting a debt amounting to PhP423 million. 19 The Existing Rehabilitation Plan: The SAGARP We now resolve the motions to declare petitioners' rehabilitation plan "not feasible" and to terminate the instant rehabilitation proceedings. The present rehabilitation plan is the SAGARP which was approved by SEC Hearing Panel on 23 December 2002. The SAGARP was precipitated by the decision of Casino Guichard-Perrachon to abandon its plan to infuse PhP3.57 billion to Uniwide. But even without the fresh capital from Casino, petitioners exuded confidence that they could generate ample cash from retail operations to support the rehabilitation plan. In short, the success of SAGARP is primarily anchored on the profitability of retail business. The key features of petitioners' rehabilitation plan are as follows: 1. Retail Business. Even without an investor, petitioners will be able to operate on their own and implement measures to achieve targets. Petitioners believe that their retail business is still viable. Petitioners will consolidate retail operations to seven (7) stores. Petitioners are confident that they will be able to increase sales through aggressive marketing programs and efficient operations. Operating expenses will be closely managed to keep these below 10% of the net sales. ASaTHc 2. Debt Settlement with Secured Creditors . Petitioners have debt of P6.61 billion with secured creditors. The SAGARP intends to pay off petitioners debts with secured creditors through dacion en pago arrangements. The residual debt with Land Bank amounting to P44.14 million shall be restructured into a five-year term loan and payment shall depend on cash flow from retail operations net of priority payments. 3. Debt Settlement with Unsecured Creditors . Petitioners have P2.54 billion debt with unsecured creditors which include trade suppliers, contractors, private lenders and non-trade creditors. The SAGARP intends to pay off petitioners' debts with unsecured creditors amounting to P2.33 billion as follows: (a) 50% of the unsecured debt by 15-year convertible notes which are redeemable any time at the option of Uniwide; (b) the other half (50%) of the unsecured debt shall be restructured into 10-year term loan inclusive of a 3-year grace period, and payment will start in year 4. The SAGARP intends to settle portion of the debt to contractors with liens and claims on Coastal Mall via dacion of Coastal Mall proportionately with other claimants. Arguments of Petitioners and the Creditors Petitioners insist that the instant rehabilitation proceedings should continue because they are already in a clear path to recovery. They state that their debts have been substantially paid off. Petitioners claim that they are just victims of sheer bad luck as the Asian financial crisis caused their businesses to collapse. They assert that their inability to fully implement the rehabilitation plan was due to unexpected refusal of some creditors to comply with the terms of the plan, lack of support from suppliers, uncertain political climate and other unforeseen factors. 20 On the other hand, creditors contend that the rehabilitation case should now be terminated since this has been dragging on for more than ten years and petitioners have not achieved the desired goals under the rehabilitation plan. The positions of the following creditors are summarized as follows: Baxter Holdings Company Inc. manifests that it desires the continuation of the rehabilitation proceedings for the primary reason that its rights and interests are best secured in the rehabilitation proceedings. It will enable to receive 15-year zero coupon convertible notes on its unsecured claim as provided in the SAGARP. 21 HAcaCS Asian Pacific Corporation states that it has no option but to agree to the continuation of the rehabilitation proceedings. Being only one of the numerous unsecured creditors of petitioners, Asian Pacific's chance of recovering its claim on its own at this late hour would be very difficult and expensive. Asian Pacific has claim of P684,713.34 against petitioners. 22 Concepcion Carrier Air Conditioning Company, Concepcion Industries Inc., Mansifeld International, Horizon Garment and Zuellig Pharma Corporation manifest their desire for the present rehabilitation proceedings to continue since the same would be beneficial to unsecured creditors like them. 23 Union Empire Inc. manifests that it joins whatever the majority creditors decide insofar as continuing the rehabilitation proceedings is concerned. 24 Philippine National Bank reiterates its prayer for the termination of the instant proceedings. Petitioners' debt with PNB is secured by real estate mortgage over Metromall which PNB shares with Allied Bank on a pari passu basis. PNB is opposing the proposed dacion en pago of Metromall as payment for other creditors' claims as it curtailed PNB/s right as mortgagee. 25 Land Bank of the Philippines (LBP) moves for the termination of the rehabilitation proceedings since this has been dragging on for more than ten years and petitioners have not achieved the desired goals and targets set in the rehabilitation plan. Petitioners are not sincere in complying with the approved rehabilitation plan as shown by petitioners proposed Third Amended Rehabilitation Plan notwithstanding that the approved Second Amended Rehabilitation Plan has not yet been fully implemented. It is odd that petitioners and LBP executed dacion en pago and restructuring agreements pursuant to SAGARP, but later on petitioners sought to annul those agreements. Petitioners owe LBP about P723.10 million, around P686.19 million of which was subject of said dacion en pago . 26 East West Banking Corporation moves for termination of this rehabilitation case. 27 Raycor Aircontrol System Inc. states that it is in favor of terminating the rehabilitation case because it is a total failure. 28 Galactica Food Corporation (Pan-a-Cup Bakeshop) opposes the continuation of the rehabilitation proceedings because more than 10 years had passed but up to this time no concrete development to pay creditors occurred. 29 aTSEcA Diamond Laboratories Inc. If Uniwide cannot even satisfy Diamond's claim as low as P68,000.00, how can it satisfy the bulk of its obligations to other creditors? Also, Uniwide admitted that its operations has resulted in continuous losses. Diamond firmly believes that rehabilitation of Uniwide is no longer feasible and there is no need to continue with the rehabilitation proceedings. 30 Applicable Rules and the Issues for Resolution In disposing of this case, the following provisions of SEC Rules of Procedure on Corporate Recovery are applicable: "Section 4-26. Termination of proceedings. In case of the failure of the debtor to submit the Rehabilitation Plan, or the disapproval thereof by the Commission, or the failure of the rehabilitation of the debtor because of failure to achieve the desired targets or goals as set forth therein, or the failure of the said debtor to perform its obligations under the said Plan, or a determination that the Rehabilitation Plan may no longer be implemented in accordance with its terms, conditions, restrictions, or assumptions , the Commission shall upon motion, motu proprio or upon the recommendation of the Interim or Rehabilitation Receiver terminate the proceedings. The proceedings shall also terminate upon the successful implementation of the Rehabilitation Plan. Until the proceedings are terminated, the parties may apply for relief with the Commission by filing in the same proceedings the appropriate pleading therefor. Upon the termination thereof for reason other than the success of rehabilitation, the debtor shall be dissolved and liquidated in accordance with the succeeding Rule." "Section 3-13. Supervening insolvency or violation of Suspension Order. If at any time during the pendency of the proceedings, the petitioner has become or is shown to be insolvent, whether actual or technical , or that it has violated any of the conditions of the suspension order, or has failed to make payments on its obligations in accordance with the approved Repayment Schedule, the Commission shall terminate the proceedings and dismiss the petition . Instead of terminating the proceedings, however, the Commission may, upon motion, treat the petition as one for rehabilitation of the debtor. Thereupon, the pertinent provisions of the succeeding Rule govern the proceedings." The issues then to be resolved are: 1. Whether or not petitioners have achieved the targets as set forth in the rehabilitation plan? 2. Whether or not the petitioners are in a state of technical or actual insolvency? caTESD 3. Whether or not the petitioners may still be rescued or revived through the institution of some changes in their management, policies, strategies or finances? 4. Whether or not rehabilitation plan may still be implemented in accordance with its terms, conditions, restrictions, or assumptions? We shall discuss these issues jointly as they are closely related. The Targets and Goals of the Rehabilitation Plan Not Achieved Based on our findings, we are convinced that petitioners failed to achieve the goals of their rehabilitation plan and said rehabilitation plan is no longer feasible. Moreover, there are ample grounds to show that petitioners are now insolvent and we are fully persuaded that petitioners' enterprise can no longer be revived. 1. Petitioners' retail business is a dismal failure . When petitioners submitted the SAGARP to the Hearing Panel in October 2001, they were optimistic that the retail operations can be sustained even without a new investor. They were confident that they can increase sales. The following data show otherwise. The numbers clearly illustrate the financial hemorrhage being endured by petitioners: (P1,000) 2002 2003 2004 2005 2006 2007 2008 (as of Sep. 30) Net 6,565,190 6,278,044 4,396,684 3,199,236 711,989 449,645 344,118 74,927 Sales Franchise 131,304 1,007 2,460 2,000 400 2,800 2,800 2,625 Income Misc. 317 6,168 122 40 1,173 Income Rental 221,362 214,065 174,859 154,037 225,999 230,725 214,013 155,603 Income Total 6,917,855 6,493,116 4,574,002 3,355,591 944,557 683,293 560,973 234,328 Revenues Cost of 5,863,277 5,464,040 3,875,368 2,965,068 583,161 374,385 285,955 101,254 Sales Gross 1,054,579 1,029,075 698,633 390,522 361,396 308,907 275,017 133,074 Profit Total Operating 1,565,261 1,412,721 1,072,139 880,292 672,682 678,500 462,080 304,687 -Expenses Profit (LOSS) (510,681) (383,645) (373,505) (489,769) (311,285) (369,592) (187,063) (171,613) from Operations Other Income & 109,195 91,878 (1,369,225) (567,849) (259,802) (367,281) (286,033) 37,476 (Expenses) Net Profit (401,486) (291,767) (1,742,731) (1,057,619) (571,087) (736,874) (473,096) (133,599) (LOSS) * From the Consolidated Balance Sheets filed by petitioners on October 14, 2009, and the Third Quarter Report of Rehabilitation Receiver dated 13 October 2009. Note that from 2002 to 2009, petitioners' sales and total revenues steadily declined which resulted in huge losses annually. Petitioners' operations never yielded profit from 2002 to 2009. This casts serious doubts on the capability of petitioners to return to their former position of successful operation and solvency. TcSICH We focus on the results of retail operations because the viability of the rehabilitation plan is precariously perched on the success of this core business. As noted by the former Hearing Panel, in the absence of fresh capital of PhP3.5 billion from Casino, the only alternative brought forth by petitioners is to generate cash from their retail operations. 31 Let us assess petitioners' performance by comparing their goals under the rehabilitation plan and actual results. Sales Target. Under the SAGARP, petitioners project that they will be able to increase sales through aggressive marketing programs and efficient operations. Below are the projected and actual sales data of petitioners: Net 2002 2003 2004 2005 2006 2007 2008 2009 Sales * Projected 6,000,000 7,000,000 7,700,000 8,277,500 9,105,250 9,783,144 10,766,958 11,574,480 (P1,000) Actual 6,565,190 6,278,044 4,396,684 3,199,236 711,989 449,645 344,118 74,927 (P1,000) (as of Sep 30) Variance 565.190 (721.956) (3,303,316) (5,078,264) (8,393,261) (9,333,499) (10,422,840) in Sales 10.31% 42.90% 61.35% 92.18% 95.40% 96.80% (P1,000) * Projected Net Sales from the Projected Income Statements of SAGARP dated October 12, 2001. We observe that in CY 2002, petitioners exceeded their sales target. In fact, this encouraging result was cited by the previous Hearing Panel when it approved the SAGARP on 23 December 2002. 32 However, from 2003 onwards, petitioners' sales data have been in swift and steep decline and never recovered. From a respectable PhP6.565 billion net sales in 2002, petitioners' net sales dived to only PhP344 million in 2008. ECaSIT It is obvious that petitioners did not achieve their projected sales target from 2003 onwards. The wide variance in projected and actual generated sales is too glaring. To illustrate, the actual sales realized in 2006 is only 7.8% of the target. In 2007, actual sales is mere 4.6% of the goal. In 2008, actual sales is measly 3.2% of the desired outcome. Apparently, it will require a miracle to achieve the sales target for 2009 in the amount of PhP11.574 billion because the actual sales realized by the end of September 2009 is just PhP74.927 million. Operating Stores . Under the SAGARP, petitioners plan to consolidate retail operations to seven stores. At present, petitioners operate only five warehouse clubs and one department store. The operating stores are the major source of petitioners' revenues. The reduction in operating stores will only contribute to severe losses. Operating Expenses. Under the SAGARP, petitioners intend to keep their operating expenses below 10% of the net sales. This means that if net sales is PhP6.565 billion (CY 2002), then the operating expenses must be kept below PhP656 million. And, if net sales is PhP344.118 million (CY 2008), then the operating expenses must not exceed PhP34.412 million. We constructed the following table showing the operating expenses and net sales from 2002 to 2009: 2002 2003 2004 2005 2006 2007 2008 2009 (as of Sep. 30) Operating Expenses 1,565,261 1,412,721 1,072,139 880,292 672,682 678,500 462,080 304,687 (P1,000) Net Sales (P1,000) 6,565,190 6,278,044 4,396,684 3,199,236 711,989 449,645 344,118 74,927 Operating Expenses as 23.84% 22.50% 24.39% 27.52% 94.48% 151% 134% 407% percentage of Net Sales It is clear that petitioners never achieved the goal of taming their operating expenses below 10% of net sales. From 2002 to 2005, petitioners' operating expenses ranged from 22% to 27% of net sales. In 2006, operating expenses jumped to 94% of net sales. Then, from 2007 onwards, petitioners' operating expenses already exceeded net sales by huge amounts. EDcIAC Annual Cash Payments . The annual cash payments for the restructured unsecured debts and bank loan 33 will come from retail operations. However, these annual cash payments will be possible only if there are sufficient cash from retail operations. Since retail operations continuously suffered losses, those annual cash payments, supposed to begin in 2006, never took place. The non fulfillment of the promised annual cash payments infuriates the creditors further. The disastrous results of retail operations indicate that petitioners' rehabilitation does not stand a chance of success. These findings debunk petitioners' ridiculous assertion that their retail business is fairly stable 34 and Rehabilitation Receiver's report that petitioners retail business is still viable. 35 2. Debt settlement with secured creditors is incredibly slow. At the time of submission of the SAGARP in 2001, petitioners have secured debt of about PhP5.82 billion, net of those settled earlier. Debt Debt Settled Secured Creditors (PhP Million) under SAGARP Balance Bank of the Philippine Islands (BPI) 720.08 720.08 0 PCCI 70.64 70.64 0 Global Bank 50.51 50.51 0 LNC SPV-AMC (successor of EBC) 907.20 413.78 493.42 ING Bank 172.52 1.23 171.29 Philippine National Bank 832.96 0 832.96 Allied Bank 360.65 0 360.65 Land Bank * 723.10 0 723.10 RCBC 1,242.49 771.07 471.42 Syndicate Banks (net of BPI) 738.55 0 738.55 TOTAL 5,818.70 2,027.31 3,791.39 ======= ======= ======= Percentage 34.84% Revised TARP, pp. 7-8; and the Third Quarter Report dated 13 October 2009, pp. 2-4. * Uniwide's debt with Land Bank should be treated as unsettled since it sought nullification of the dacion & restructuring agreements. Based on our computation, the amount of secured debt settled by petitioners under the SAGARP is PhP2.027 billion which is 34.84% of the secured debt. Petitioners should have done better. Dacion en Pago . Under the SAGARP, petitioners intend to pay off debts with secured creditors through dacion en pago arrangements. Petitioners dacioned properties to Global Bank, PCCI and BPI in settlement of PhP50.51 million, PhP70.64 million, and P720.08 million debts respectively. Petitioners also executed dacion and restructuring agreements with Land Bank aimed at settling PhP723.10 million debt. But petitioners sought nullification of those agreements and Land Bank could not dispose of the dacioned properties. To date, the dacion en pago with Allied Bank, PNB, LNC SPV-AMC Corp. and other secured creditors have not taken place. This has been a plan since 2001. Debt Restructuring. Under the SAGARP, petitioners' residual debt with Land Bank of about PhP44.14 million shall be restructured into a five-year term loan and payment shall depend on cash flow from operations net of priority payments. As earlier stated, petitioners and Land Bank executed restructuring agreement in 2004 covering the residual debt. However, four years later, petitioners sought nullification of said agreement. 3. Petitioners' settlement of debt with unsecured creditors is way off the target. Let us compare the goals of petitioners under the rehabilitation plan against the actual achievements: Settlement of Unsecured Debt. The SAGARP shows that as of 30 June 1999 petitioners have PhP2.54 billion debt with unsecured creditors. However, as of 13 October 2009, petitioners still owe unsecured creditors approximately PhP2.377 billion. 36 That translates to a measly 6.3% debt settlement over a period of ten years. Issuance of Convertible Notes. Under the SAGARP, petitioners intend to settle 50% of the unsecured debt by way of 15-year convertible notes which are redeemable any time at the option of petitioners. The goal is to issue about PhP1.077 billion convertible notes. 37 Petitioners reported that since January 2006 they have been issuing convertible notes to unsecured creditors. Sadly, as of 30 September 2009, only a total of PhP71.05 million convertible notes were issued. To date, issuance of convertible notes has been deferred. 38 This means that petitioners issued only about 6.6% of the target PhP1.077 billion convertible notes. This is a plain flop. Payment for Restructured Loans . Under the SAGARP, the other half (50%) of the unsecured debt shall be restructured into 10-year term loan inclusive of a 3-year grace period. Cash payment for the principal should start in year 4 following the approval of the plan. 39 Petitioners reported that they have been issuing restructuring agreements to the unsecured creditors. Annual cash payment for the principal was supposed to start in CY 2006. Unfortunately, not a single cash payment for the restructured debt was made as projected because of the consistent negative results of retail operations. 40 Obviously, this part of the debt settlement program is a disaster. aAcDSC Settlement of Debt with Contractors . Under the SAGARP, petitioners intend to settle portion of the debt to contractors with liens and claims on Coastal Mall via dacion of Coastal Mall proportionately with other claimants. 41 However, petitioners disclosed that all members of Coastal Mall syndicate refused to implement the dacion of Coastal Mall. In fact, under the Revised TARP, obligation to contractors with liens and claims on Coastal Mall will now be settled via dacion of a portion of the Metromall property. 42 Hence, settlement of debt with contractors under the SAGARP is a total failure. 4. Petitioners are now insolvent and can no longer be revived. At the time of filing of this petition on 25 June 1999, petitioners were solvent as their assets (PhP19.864 billion) exceeded liabilities (PhP11.101 billion), but they have difficulty meeting their obligations. By the time SAGARP was approved in December 2002, petitioners assets plummeted to PhP11.833 billion, while their liabilities stood at PhP11.260 billion. Petitioners' assets and liabilities are presented below: (P1,000) 2002 2003 2004 2005 2006 2007 2008 2009 (as of Sep 30) Current 6,965,798 4,664,381 2,943,489 1,788,547 1,668,514 1,458,607 1,329,592 1,218,882 Assets Total 11,833,284 8,652,888 6,583,106 3,666,054 3,488,029 3,148,189 2,918,477 2,726,131 Assets Current 11,260,294 10,774,933 10,232,256 8,878,178 9,070,134 12,427,967 9,511,795 12,291,750 Liabilities Total 11,260,294 10,774,933 10,232,256 8,878,178 9,070,134 12,427,967 9,511,795 12,291,750 Liabilities From 2003 to 2009, petitioners' total liabilities consistently surpassed total assets. To date, petitioners assets are almost depleted and amount only to PhP2.726 billion. In contrast, their total liabilities increased to PhP12.292 billion. In other words, petitioners are already insolvent since 2003 or just one year after the implementation of SAGARP. 43 HCEcaT The following analysis will further enlighten us on the financial condition of petitioners. Debt-to-Asset Ratio . Petitioners have very high debt-to-asset ratios: (P1,000) 2002 2003 2004 2005 2006 2007 2008 2009 (as of Sep 30) Total 11,260,294 10,774,933 10,232,256 8,878,178 9,070,134 12,427,967 9,511,795 12,291,750 Liabilities Total 11,833,284 8,652,888 6,583,106 3,666,054 3,488,029 3,148,189 2,918,477 2,726,131 Assets Debt Asset .95 1.24 1.55 2.42 2.60 3.95 3.26 4.51 Ratio The debt-asset ratio shows the proportion of a company's assets which are financed by borrowing. 44 A debt ratio greater than 1.0 means the company has negative net worth and is technically bankrupt. The table shows that petitioners' debt-asset ratios have always been greater than 1.0 since 2003. The debt-asset ratio started at 1.24 in 2003, climbed to 2.42 in 2005, and then grew to 3.95 in 2007. By 2009, petitioners' debt-asset ratio swelled to 4.51. This further validates petitioners' insolvency. Current Ratio. Petitioners are not liquid. The table below plots the current ratios of petitioners over time. (P1,000) 2002 2003 2004 2005 2006 2007 2008 2009 (as of Sep 30) Current 6,965,798 4,664,381 2,943,489 1,788,547 1,668,514 1,458,607 1,329,592 1,218,882 Assets Current 11,260,294 10,774,933 10,232,256 8,878,178 9,070,134 12,427,967 9,511,795 12,291,750 Liabilities Current 0.62 0.43 0.29 0.20 0.18 0.12 0.14 0.10 Ratio Current ratio is the firm's current assets to its current liabilities. It measures the firm's ability to immediately pay its current debts. 45 The rule of thumb prescribes a current ratio of 2.0, meaning, for every peso of short-term debt, there should be two pesos of cash or near cash available. Typically, there should be two pesos in cash, where one peso is for payment and another peso is for operation. ESCcaT The table clearly shows that petitioners have always been in worst position. Petitioners current ratio has always been less than 1. This means that they have more short term debts than current assets. This confirms petitioners' inability to meet current obligations as they fall due and contributes to petitioners' insolvency. Debt-to-Equity Ratio . Petitioners have negative debt-to-equity ratios. (P1,000) 2002 2003 2004 2005 2006 2007 2008 2009 (as of Sep 30) Total 11,260,294 10,774,933 10,232,256 8,878,178 9,070,134 12,427,967 9,511,795 12,291,750 Liabilities Stock (1,362,917) (4,085,273) (5,944,518) (8,230,725) (8,674,675) (9,279,778) (9,667,727) (9,565,619) Equity Debt Equity -8.26 -2.64 -1.72 -1.08 -1.04 -1.34 -0.98 -1.28 Ratio Debt to equity ratio compares a company's total debt to shareholders' equity. It is derived by dividing the company's total liabilities by its shareholders' equity. 46 If a company has a debt-equity ratio of 2 to 1, it means that the company has two pesos of debt to every one peso shareholders invest in the company. In other words, the company is taking on debt at twice the rate that its owners are investing in the company. The general norm is that a company is considered safer if it has a low debt to equity ratio, that is, a higher proportion of shareholder-supplied capital. A negative debt-to-equity ratio means the company's net worth is negative which, in turn, indicates that it has more debt than assets. A negative net worth means that the company has been losing and is in trouble. In this case, petitioners have negative debt-to-equity ratios because they have negative net worth. Chronic Losses . Petitioners have been accumulating massive losses annually. From PhP6.978 billion in losses in 2002, petitioners' losses now amount to a staggering PhP15.467 billion. This process seems irreversible considering the continuous negative results in retail business. (P1,000) 2002 2003 2004 2005 2006 2007 2008 2009 (as of Sep 30) Net Income (6,978,906) (7,221,630) (9,943,986) (11,803,231) (13,682,313) (14,774,268) (15,669,379) (15,467,235) (Loss) Enormous Capital Deficit. Petitioners' capital deficiency has grown enormously. At the time this petition was filed in 1999, petitioners' stockholders' equity amounted to PhP11.147 billion. From then on, petitioners' capital steadily decreased and since 2002 became negative due to losses, as shown below. SDaHEc (P1,000) 2002 2003 2004 2005 2006 2007 2008 2009 (as of Sep 30) Capital 3,205,234 3,205,234 3,205,234 3,205,234 3,224,242 3,224,242 3,224,242 3,224,242 Stock Additional 2,653,478 2,653,478 2,653,478 2,653,478 2,653,478 2,653,478 2,653,478 2,653,478 Paid up Net Income (6,978,906) (7,221,630) (9,943,986) (11,803,231) (13,682,313) (14,774,268) (15,669,379) (15,467,235) (Loss) Total Stock (1,362,917) (4,085,273) (5,944,518) (8,230,725) (8,674,675) (9,279,778) (9,667,727) (9,565,619) Equity By the time SAGARP plan was approved in December 2002, petitioners had already a capital deficiency of PhP1.362 billion. As of September 2009, petitioners' capital deficit stood at a gargantuan PhP9.567 billion which is a stark contrast to the PhP11.147 billion capital at the start of the rehabilitation proceedings. On this score, petitioners admitted that the huge capital deficiency indicates the existence of material uncertainty which casts significant doubt about their ability to continue as going concern. 47 We totally agree. Fresh Capital Not Forthcoming . Distressed companies usually employ a number of strategies in order to revive and restore themselves to their former condition of successful operation. Traditionally, the schemes include improving their profitability, injection of fresh capital from new investors and infusion of additional funds from existing stockholders. In this case, the first approach is not possible because petitioners have been incurring chronic losses. The second scheme was tried but aborted when prospective white knight Casino did not pursue its investment in petitioners in the amount of PhP3.5 billion. Some ideas didn't really work as planned. That leaves petitioners' stockholders to raise the sufficient capital for their tattered enterprise. No such action was done so far. And we doubt if one will come. So, on the bases of the considerations earlier discussed huge losses in retail business, failure in settlement of debt with secured and unsecured creditors, enormous capital deficit and absence of fresh capital we are fully convinced that petitioners can no longer be rescued. cEITCA 5. Petitioners' rehabilitation plan can no longer be implemented under the terms, conditions, restrictions and assumptions prescribed therein . To the point of being plethoric, we shall summarize each component of the rehabilitation plan which cannot be carried out anymore. Under the SAGARP, petitioners foresee to increase sales and make their retail business viable even without new investors. The financial statements show that sales have dwindled into insignificance and petitioners reaped losses not profit. Under the SAGARP petitioners intend to pay off debts with secured creditors through dacion en pago arrangements. To date, the planned dacion en pago with Allied Bank, PNB, LNC SPV-AMC Corp. and other secured creditors have not taken place. This has been the plan since 2001. Evidently, the dacion will not take place since the mentioned secured creditors are against it. As regards Land Bank, petitioners executed dacion and restructuring agreements with the bank in 2004. But in 2007, petitioners sought nullification of said agreements. Now, Land Bank simply wants out of the rehabilitation program. Under the SAGARP, petitioners plan to restructure 50% of unsecured debt into 10-year term loan and annual cash payment will start in year 4. This annual cash payment is possible only if there are sufficient cash from retail operations and this should have begun in 2006. Inasmuch as retail operations continuously suffered losses, the annual cash payments never took place. Under the SAGARP, petitioners intend to settle portion of the debt to contractors with liens and claims on Coastal Mall via dacion of Coastal Mall proportionately with other claimants. This manner of settlement assumes that the other parties involved in the proposed dacion of Coastal Mall will mutually agree to the terms of the proposal. However, petitioners admitted that all members of Coastal Mall syndicate refused to implement the dacion of Coastal Mall. Petitioners have abandoned this plan. In fact, under the proposed Revised TARP, obligation to contractors with liens and claims on Coastal Mall is proposed to be settled via dacion of a portion of the Metromall property. CcaASE Petitioners Not Forthright in Complying with the Plan We underscored the fact that from 2002 to 2004, petitioners and Land Bank executed dacion and restructuring agreements for the settlement of about PhP686 million debt. Unexpectedly, petitioners in 2007 filed with RTC Paraaque City a complaint to nullify said agreements. We also emphasized that the dacion en pago scheme is the proposal of petitioners. It is rather odd that after petitioners proposed and executed the dacion , they repudiated it. Certainly, it is misleading for petitioners to claim that they have substantially paid their obligations with Land Bank and their outstanding debt is only to PhP36.91 million. As it stands, petitioners still owe the bank about PhP723 million. We also examined petitioner Uniwide Holdings Inc. Quarterly Report (SEC Form 17-Q) for the period ended 30 September 2009 which is required to be filed with the Philippine Stock Exchange and the SEC. On pages 5 and 6 thereof, petitioners disclosed the series of dacion en pago agreements they entered into with Land Bank. On page 44, petitioners mentioned that several dacion arrangements have been completed, some have just been concluded and others are under various stages of documentation and negotiations. Still the listed company did not disclose the material information that Uniwide Group filed a case for annulment of the dacion en pago contracts and restructuring agreement entered into by petitioners and Land Bank. Petitioners may have violated the securities law and generally accepted accounting principles by failing to make the necessary disclosure. Bad Governance, Not Bad Luck Petitioners claim that they were victims of sheer bad luck as the Asian financial crisis caused their various businesses to founder. They cite the oversupply in real estate business and unpredictable peso-dollar exchange rate in 1997 which resulted in soaring interest rates as causes of their soaring debts. 48 They assert that their inability to fully implement the rehabilitation plan was due to unexpected refusal of some creditors to comply with the terms of the plan, lack of support from suppliers, uncertain political climate and other unforeseen factors. 49 It is absurd for petitioners to attribute their financial debacle to bad luck and the 1997 Asian financial crisis. Unfortunately, we are not endowed with faculty to fathom providential matters like the "bad luck" that befell petitioners. We just rely on empirical data. Besides, the Supreme Court has ruled that the 1997 financial crisis that ensued does not constitute a fortuitous event. The High Court added: IDSaTE "Also, we cannot generalize that the Asian financial crisis in 1997 was unforeseeable and beyond the control of a business corporation . It is unfortunate that petitioner apparently met with considerable difficulty e.g., increase cost of materials and labor, even before the scheduled commencement of its real estate project as early as 1995. However, a real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency movements and business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence, and fluctuations in currency exchange rates happen everyday , thus, not an instance of caso fortuito . 50 Therefore, petitioners cannot blame the Asian financial crisis, uncertain political climate and other unforeseen factors for their woes. As noted by the High Tribunal, a real estate enterprise, like petitioners, is supposed to be an expert in projection of product demand, currency fluctuation and risk assessment. Every finance textbook mentions that political events such as military conflicts, social unrest and fall of government can influence foreign exchange market. 51 As a conglomerate with diverse business interests, petitioners are expected to employ highly competent management and sound corporate strategies to ensure that they thrive despite financial crises. In short, they should practice good corporate governance to mitigate risks and avoid business failure. An economist 52 argues that the availability of suspension of payment and rehabilitation raises some issues on corporate governance. One is the moral hazard problem. Corporations can be more aggressive in borrowing funds from creditors knowing that they can resort to suspension of payment in the event they get into financial difficulties. This could lead to highly leveraged corporations, as in the case of petitioners. Petitioners also harp on the "unexpected refusal" of some creditors to comply with the terms of the rehabilitation plan. It is suffice for us to say that it was the petitioners who proposed the terms of the rehabilitation plan. Petitioners made representations that they conducted consultative meetings to seek support of creditors for the successful implementation of the plan. Blaming this creditor or that is somewhat beside the point. Government Policy Petitioners reminded us of the policy of the government to encourage the rehabilitation of distressed companies. STECAc We fully agree. At this juncture, a scholarly research paper is instructive. It asserts that smooth entry and exit of firms is an essential element in a competitive market economy. Assets of insolvent companies should immediately be disposed of so that they can be used by others who can utilize them optimally. 53 Records show that out of its concern for distressed businesses, the SEC has afforded petitioners so much opportunities since 1999 to find the proper solutions to stay afloat and ward off financial collapse. But such policy should not be supposed that every faltering enterprise will be accorded relief as long as it wishes. Rehabilitation case is justified only if the debtor company may still be rescued or revived. 54 In the case of petitioners, which we now found to be insolvent, they can no longer be revived for reasons cited earlier. We must not forget that creditors have also their rights which as such are entitled to respect and enforcement in the interest of simple fair play. Our concern for distressed firms, however, has not blinded us to rule that justice is in every case for the deserving. Petitioners have had enough without success. We shall now write finis to this case. WHEREFORE, premises considered: 1. Petitioners' Motion to Approve Revised Third Amendment to the Group Rehabilitation Plan (Revised TARP) is DENIED. 2. The motions to declare petitioners' rehabilitation plan "not feasible" are GRANTED. Consequently, the instant rehabilitation case is TERMINATED and the stay order is lifted and dissolved. This case is deemed finally disposed of pursuant to Section 5.2 of Republic Act No. 8799. The Rehabilitation Receiver, Atty. Julio C. Elamparo, is directed to submit his final report within thirty (30) days from receipt hereof. SO ORDERED. Mandaluyong City, January 13, 2010. (SGD.) JOCELYN VILLAR-ALTAMIRA Head, Hearing Panel (SGD.) EMMANUEL Y. ARTIZA Member (SGD.) ARMANDO PAN, JR. Member Footnotes 1. PNB Compliance dated 14 October 2009; Land Bank Manifestation dated 28 October 2009; Raycor Aircontrol System Inc. Manifestation dated 30 October 2009; East West Bank Manifestation dated 30 October 2009; Galactica Food Manifestation dated 6 November 2009; Diamond Laboratories Manifestation dated 23 November 2009. 2. Uniwide Consolidated Interim Balance Sheets, ending September 30, 2009. 3. Solvent but distressed company has sufficient assets to cover all its debts but foresees difficulty of meeting them when they fall due. (Section 5 [d], PD No. 902-A; Section 3-1, SEC Rules of Procedure on Corporate Recovery) 4. Technical insolvency the corporation has sufficient assets to cover all its debts but it foresees its inability to pay its obligations for more than one year. (Section 3-12, SEC RPCR) 5. Actual insolvency the corporation's assets are not enough to cover its liabilities. (Section 5 [d], PD 902-A; Section 4-1, SEC RPCR) 6. Allied Bank's Opposition to Motion to Approve Revised Amendment to Rehabilitation Plan dated 5 December 2008. 7. LNC SPV-AMC Corporation's Comment with Motion dated 17 June 2009. 8. Land Bank's Comment to the Revised Amended Rehabilitation Plan dated 30 June 2009. 9. PNB's Compliance/Manifestation dated 14 October 2009; Motion to Terminate Proceedings dated 24 April 2008. 10. East West Bank's Manifestation dated 30 October 2009. 11. LG Electronics Comment to the Revised TARP dated 19 November 2008. 12. Union Empire's Comment to the Motion to Approve Revised TARP dated 25 November 2008. 13. Complaint of Uniwide dated 30 August 2007 and Order of RTC Paraaque City dated 20 February 2009. 14. Bank of the Philippine Islands vs. ASB Holdings Inc. , GR-164641, December 20, 2007. 15. PNB vs. ASB Holdings Inc. , GR-165571, January 20, 2009; Metrobank vs. ASBHI, GR-166197, February 27, 2007. 16. Section 4-10, SEC Rules of Procedure on Corporate Recovery. 17. Order of the Hearing Panel to re-appraise Metromall property dated 30 July 2009. 18. Third Quarter Report of Rehabilitation Receiver dated 13 October 2009, p. 4. 19. LNC SPV-AMC Corporation's Comment with Motion dated 17 June 2009. 20. Petitioners' Motion for Partial Reconsideration dated 28 October 2009; Manifestation/Compliance dated 23 November 2009. 21. Baxter Holdings Manifestation dated 3 November 2009. 22. Asia Pacific Manifestation dated 5 November 2009. 23. Concepcion Carrier, et al. Manifestation dated 9 November 2009. 24 Union Empire Manifestation dated 4 November 2009. 25. PNB Compliance/Manifestation dated 14 October 2009. 26. Land Bank Manifestation dated 28 October 2009. 27. East West Bank Manifestation dated 30 October 2009. 28. Raycor Aircontrol Manifestation dated 30 October 2009. 29. Galactica Food Manifestation dated 6 November 2009. 30. Diamond Laboratories Manifestation dated 23 November 2009. 31. Order of Hearing Panel dated 23 December 2002 approving SAGARP, p. 2. 32. Order of the Hearing Panel dated 23 December 2002, p. 4. 33. Like the PhP1.15 billion restructured debt with unsecured creditors and PhP44 million residual debt with Land Bank. 34. Petitioners' Motion for Partial Reconsideration dated 28 October 2009, p. 13. 35. Third Quarter Report of Rehabilitation Receiver dated 13 October 2009, p. 6. 36. Third Quarter Report of Rehabilitation Receiver dated 13 October 2009, p. 4. 37. SAGARP, p. 9. 38. Uniwide SEC Form 17-Q dated 30 September 2009, p. 31. 39. SAGARP, p. 9. 40. Third Quarter Report of Rehabilitation Receiver dated 13 October 2009, p. 5. 41. SAGARP, p. 9. 42. Revised TARP, pp. 3, 9. 43. A debtor is insolvent if its assets are not sufficient to cover its liabilities. (Section 4-1, SEC Rules of Procedure on Corporate Recovery). 44. Weygandt, Jerry. Managerial Accounting, 2008, p. 637; Levy, Haim. Introduction to Investments, 1999, p. 785. 45. Wild, John. Fundamental Accounting Principles, 2008, p. 685. 46. Warren, Earl. Managerial Accounting, 2002, p. 510; White, Gerald. The Analysis and Use of Financial Statements, 1998, p. 159. 47. Quarterly Report (SEC Form 17-Q) dated 30 September 2009. 48. Petitioners' Petition filed on June 25, 1999, p. 2. 49. Petitioners' Motion for Partial Reconsideration dated 28 October 2009; Manifestation/Compliance dated 23 November 2009. 50. Fil-Estate Properties Inc. vs. Spouses Gonzalo , GR-165164, August 17, 2007. 51. Eitman, David. Multinational Business Finance, 2007, p. 181. 52. Lamberte, Mario. The Philippines: Challenges for Sustaining the Economic Recovery. PIDS Discussion Paper 2000-02. 53. Lamberte, Mario. The Philippines: Challenges for Sustaining the Economic Recovery. PIDS Discussion Paper 2000-02. 54. Section 4-1, SEC Rules of Procedure on Corporate Recovery: "A debtor which is insolvent because its assets are not sufficient to cover its liabilities, or which is technically insolvent under Section 3-12 of these Rules, but which may still be rescued or revived through institution of some changes in its management, organization, policies, strategies, operations, or finances, may petition the Commission to be placed under rehabilitation."