Vol. XXII, No. 83 [ BusinessWorld Online ]
Wednesday, November 19, 2008 | MANILA, PHILIPPINES
BY MARITES S. VILLAMOR, Cebu Bureau Chief
MACTAN, CEBU — Lucio Tan-controlled Philippine National Bank (PNB) and William Gatchalian-led Waterfront Philippines, Inc. have agreed in principle to restructure the latter’s loan anew, averting, for the moment, the foreclosure of two hotels.
A compromise agreement is expected to be submitted to the Lapu-Lapu Regional Trial Court "before Wednesday" next week, PNB counsel Estelito P. Mendoza yesterday said.
"It looks like we’re going to settle the problem amicably. We are agreed in principle on all fundamental points. In a very trite way, it will be a ‘win-win’ solution," Mr. Mendoza said after a court proceeding. This was a departure from PNB’s position last week when Mr. Mendoza said he had been given "specific instructions to foreclose."
He declined to elaborate on the terms. Asked why the Lucio Tan Group had a change of heart, Mr. Mendoza said "the loan is going to be paid."
The court again postponed a hearing on Waterfront’s complaint for injunction against foreclosure proceedings initiated by PNB. Also postponed, for the second time, was the publication of a notice of extrajudicial sale involving the Waterfront Cebu City Hotel & Casino and Waterfront Airport Hotel & Casino.
If negotiations between Waterfront and PNB collapse, the court will hear the complaint on November 26.
Waterfront external counsel Tito E. Pintor, Jr. described ongoing talks as "very promising."
Mr. Pintor said the legal teams of both parties, along with Waterfront Treasurer Elvira A. Ting and PNB Senior Vice-President Aida M. Padilla, met a few hours before the court proceedings yesterday to discuss the proposed compromise.
The terms are being threshed out by the legal teams, both of which been given instructions on the extent of their authority to negotiate, Mr. Pintor added.
Waterfront, as of October 23 this year, still had an outstanding loan of P744.946 million exclusive of penalties, expenses, charges and attorney’s fees. PNB called on the loan last month and initiated foreclosure proceedings involving the 562-room Waterfront Cebu City Hotel, Waterfront’s flagship property and the biggest hotel in Cebu City, and the 167-room Waterfront Airport Hotel & Casino Mactan.
The original $30-million loan, secured in March 1997 by Waterfront and subsidiaries Waterfront Cebu City Casino Hotel, Inc. and Waterfront Mactan Casino Hotel, Inc. to finance the construction of the Cebu City hotel, was converted to peso and restructured three times.
Waterfront had paid some P1.2 billion, P400 million for the principal and P800 million in interest, as of 2007.
Waterfront asked PNB in June to again restructure the balance, saying it was in the middle of negotiations with major leasing client Philippine Amusement and Gaming Corp. (Pagcor) for another contract. Rental receivables from Pagcor were assigned by Waterfront in 2004 to service the PNB loan as part of the third restructuring agreement.
Waterfront’s proposal was to reinstate loan conditions prior to the time when PNB considered the loan on technical default.
Lamberto B. Mercado, Jr., vice-president for legal affairs of Waterfront’s parent Wellex Group, Inc., has said Waterfront expects to receive almost P20 million a month from Pagcor.
This, he said, will be enough to cover the monthly amortization of P6 million for the principal and about P12 million in interest based on the third restructuring deal.
Waterfront had filed a complaint for injunction to stop the foreclosure proceedings. Both parties agreed last week to postpone the auction of the two hotels.
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