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High court upholds decision approving Puerto Azul’s rehab plan

Posted on November 03, 2014 10:44:00 PM [ BusinessWorld Online ]

THE DEVELOPER of the Puerto Azul seaside estate in Cavite can proceed with its rehabilitation plan, the Supreme Court has ruled, reversing an appellate court decision that sided with the resort developer’s creditors.

In its Sept. 17 ruling released to media on Monday, the high court’s first division said it finds in favor of the Puerto Azul Land, Inc. (PALI).

Regulatory filings with the Securities and Exchange Commission show Rebecco E. Panlilio and his family as the incorporators of PALI.

Listed company Boulevard Holdings, Inc., also headed by the Panlilio group, began talks last year with property giant Ayala Land, Inc. for the sale of Puerto Azul -- a sprawling mountainous beach-golf resort and country club in Ternate, Cavite -- but last month, Ayala Land said it is no longer pursuing the deal.

The Supreme Court’s Sept. 17 decision reverses a 2008 ruling by the Court of Appeals (CA) that favored PALI’s creditors -- proxies of the now defunct Equitable PCI Bank (which merged with BDO Unibank, Inc.) and Export and Industry Bank.

PALI creditors took the case to the appellate court after a Manila trial court approved in 2005 the rehabilitation plan of the Puerto Azul developer.

PALI owed P640 million at the time. It sought rehabilitation on Sept. 14, 2004 after its finances wobbled, citing as reasons the Philippine Stock Exchange’s denial for it to raise more capital through an initial public offering; the 1997 Asian financial crisis that depressed real estate values; and the real estate bubble burst.

Creditors objected to the rehabilitation plan, which included among others a 50% haircut on PALI’s principal obligation, as well as the condonation of penalties and interests.

“We find nothing erroneous in the terms of PALI’s rehabilitation. The Interim Rules on Corporate Rehabilitation provides for means of execution of the rehabilitation plan,” the high court said.

The Supreme Court also said that the restructuring of the debts of Puerto Azul Land is “part and parcel” of its rehabilitation.

“Per findings of the RTC (regional trial court) and as affirmed by the CA, the restructuring of debts of PALI would not be prejudicial to the interest of PWRDC as a secured creditor,” the high court said, referring to Pacific Wide Realty Development Corp. (PWRDC), the creditors’ proxy.

The case was docketed as G.R. No. 184000 Puerto Azul Land, Inc. vs. Pacific Wide Realty Development Corp.

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