Andaya, Krizzia May E.
5BSA
August 22, 2015
Case 3: Victorias Milling Company, Inc.: A Bitterweet Struggle (Part 1 o 3! Core Pro"lem: The proble in this !ase is ho" to #orulate and e$e!ute an e##e!ti%e debt restru!turing
and an appropriate rehabilitation plan that !oin!ides "ith the plan subitted by the board o# &M'( and "ith those o# SE')appointed Man'o that ais to get &M'( ba!* on tra!* by paying o## its obligations and that ser%es and "ill !ater to the best interest o# the !reditors and the sto!*holders. Summary#$a Summary#$acts: cts: &i!torias Milling 'opany, (n!. +&M'( is the largest sugar ill operator in the
-hilippines and one o# the largest in Southeast Asia. Through the years, &M'( has e$panded into the pa!*ing, #ood, and engineering industry. &M'( also de%eloped a gol# and !ountry !lub and has business %enture in !ut#lo"er, aua!ulture, !attle and piggery. But in 1//, &M'( su##ered a setba!* that no one !ould ha%e #oreseen to happen. n a !reditors eeting on Mar!h 10, 1//, they rea!hed an agreeent to not #ile any !lais on the !ourt and gi%e rehabilitation a !han!e, a #irst in the !ountry, and to !on%in!e &M'( not to #ile #or suspension o# payents in e$!hange #or not #illing #or the !opanys liuidation in the !ourt. !ourt. They also also agreed agreed to #or #or a "or*i "or*ing ng !oit !oittee tee that that "ould "ould !oordi !oordinat natee "ith "ith the &M'( anageent anageent and a study group to reprodu!e the operational operational and #inan!ial #inan!ial state o# &M'( to be used in !oparing it against the #indings o# the anageent. A!!ording to the Mar!h 10 inutes, &M'( "ould as* the sto!*holders to "ai%e their pre)epti%e rights to #a!ilitate the entry o# ne" in%estors, raise its !apital sto!* by 13 to -4.B and !ut do"n eployees. Mean"hile, 6onear!o, the single biggest debtor aong &M'(7s subsidiaries de!lared !ash di%idend that "as uestioned by the shareholders. 6onear!o itsel# had -2.0/B in debts. n April 1// the dra#t o# Meorandu o# Agreeent that "ould #oralize the debt restru!turing plan "as transitted to the 82 !reditors #or appro%al and 03 ha%e signi#ied their appro%al a!!ording to a sour!e. By 9une 1, 1//, 5 !reditor ban*s re#used to sign the MoA and the :eed o# Se!ondary Mortgage !iting that &M'( re#used to honor the re#ined sugar deli%ery re!ords +;S:s that is "orth -<15M used as !ollateral by 6onear!o. A!!ording to the due diligen!e report o# 9oauin 'unanan and 'o., they un!o%ered the irregular issuan!e o# ;S:s by &M'( o##i!ers. n 9une 24, 1//, Business =orld reported that &M'( and Ban*ers Trust, its #inan!ial !onsultant, #ailed to !oe !oe up "ith "ith a spe!i# spe!i#i! i! rehabi rehabilit litati ation on plan. plan. >urthe >urther, r, 6onea 6onear!o r!o #iled #iled a petiti petition on "ith "ith SE' #or suspension o# debt payents to its !reditors. n 9uly 1, 1//, -'(Ban* #iled a otion to disiss 6onear!os petition priarily on the ground that 6onear!o did not subit a ?%iable !ause #or rehabilitation?. rehabilitation?. n 9uly , 1//, &M'( #iled a petition "ith the SE' #or suspension o# debt payents and appointent o# a re!ei%er that "ill o%ersee the ipleentation o# the subitted rehabilitation plan. (n id)9uly 1//, &M'( #inally shut do"n its illing operations #or the %ery #irst tie in years, the reason they !ited is the sharp o# do"nturn in sugar pri!es and gro"ing !opetition. :ue to this, 2,000 out o# 4,500 "or*ers "ere displa!ed. Be#ore the end o# 9uly 1//, &M'( petitioned the SE' to !reate a
pro%isional Manageent 'oittee +Man'o to o%ersee the operations o# the operations o# the !opany and "as appro%ed the !oposition on August 25, 1// and ordered to !on%ene on Sept. 1, 1//. A #e" days a#ter the Man!o "as !on%ened, &M'( subitted their o"n rehabilitation plan to the SE'. (n 9anuary 1//, the Man!o "as #inalizing a ne" rehabilitation plan e$pe!ted to be %ery di##erent #ro the plan subitted by the &M'(s board. Three onths later, by the end o# April 1//, none o# the subitted rehabilitation plans had been ipleented. A#ter alost 2 years, &M'( #iled #or a suspension o# payent aounting to -<.5M and SE' appro%ed the rehabilitation plan that re!on!iled the di##eren!es o# &M'( and the Man!o. 1. ( "ould gi%e the B: o# &M'( a s!ore o# 8. Against -rin!iple <, Se!tion A, the B: did not a!t in the
best interest o# the shareholders, eployees and the publi! good. The B: should re%ie" the E': prin!iples and should stri!tly ipleent it. The B: should a!t in a #ully in#ored basis, in good #aith and "ith due diligen!e and !are. @nder se!tion ', the board did not apply high ethi!al standards "hen the auditing #ir un!o%ered irregular issuan!e o# re#ined sugar deli%ery order +;S:s by &M'( o##i!ers and the ebezzleent #or appropriating !opany #unds #or personal use. The !opany should de%elop a stri!t !ode o# !ondu!t, pro#essional standards and broader !odes o# beha%ior. Se!tion :)<, the board abused related party transa!tions and isuse o# !orporate assets. The !opany should ha%e an internal auditor that "ill o%ersee and un!o%er any isuse o# !orporate assets and any abusi%e related party transa!tions. And the !opany should en!ourage eployees to report any unethi!alunla"#ul beha%ior "ithout #ear o# retribution. The !opany did not ha%e an independent audit syste that reports dire!tly to the board in opposed to Se!tion :). The !opany should #or an independent audit !oittee that "ill re%ie" and report to the board any alpra!ti!es and anoalies. And in Se!tion B, the Board did not treat the shareholders #airly as stated in the Mar!h 10 inutes that they "ould as* the to "ai%e their pre) epti%e rights to pa%e "ay to ne" in%estors. The !opany should establish and ipleent rules !on!erning the shareholders7 proper !ouni!ation, the shareholders should be able to %oi!e out their suggestions regarding the !hanges that "ill be ade. %. (n prin!iple 8, the !orporate go%ernan!e #rae"or* should ensure euitable treatent o# shareholders, in!luding inority and #oreign. Minority shareholders should be prote!ted #ro !ontrolling shareholders. And insider trading and abusi%e sel#)dealing should be prohibited. The !lear appli!ation o# treating shareholders #airly "as the part "here the !reditors had a eeting "herein both sides "as gi%en the !han!e to %oi!e out their suggestions that is bene#i!ial to all and that no aor de!isions "ould ipede the rights o# other shareholders. The area that "as issed "as the right o# shareholders to in#oration about the !orporation. (t "as agni#ied during the !reditors eeting "hen no one *ne" the e$a!t nuber o# !reditors and net assets o# &M'(. 3. 6o, the "or*ers and iddle eployees "ere not ta*en into !onsideration in the rehabilitation. A!!ording to the &M'( Mar!h 10 inutes, they are !urtailing eployees to !ut do"n !osts. :uring the shutdo"n o#
&M'(, 2,000 out o# 4,500 "or*ers "ere reo%ed and departents only retained 103 o# its "or*#or!e. And in the rehabilitation plan subitted by the board o# &M'(, they indi!ated that they "ill redu!e the anpo"er by 513 #ro 4,848 to 2,14. =ith these in!idents, it sho"ed that the "or*ers "ere le#t "ith no !hoi!e and "ere reo%ed by the !opany. &. The board o# &M'( and SE')appointed Man'o ea!h subitted their o"n rehabilitation plan and "ants their respe!ti%e plans to be !hosen and ipleented. There "ere !reditors that opposed to the adoption o# &M'(s plan be!ause "ant to settle the ;S:s issue #irst. This "as un!o%ered to be true "hen the 9oauin 'unan and 'o. audited the !opany. The issue about the pre)epti%e rights o# shareholders "as also raised "hen the Man'o in!luded it in its o"n rehabilitation plan. The shareholders o# &M'( stated that they ha%e no right to di!tate and pre%ent the in e$er!ising their right to buy ne"ly issued shares, be!ause it is a property right. This is %alid be!ause it is stated in the 'orporation 'ode o# the -hilippines that all shareholders shall enoy a pre)epti%e right to subs!ribe to all issues o# shared o# any !lass. But Man'o de#ended its plan saying that there is no assuran!e that e$isting shareholders "ould be able to raise the needed #resh !apital o# appro$iately -<00M and prohibiting their pre)epti%e right !an attra!t potential strategi! in%estors to bid. To #ully address these issues, the SE' should appro%e a plan that "ill re!on!ile the di##eren!es o# &M'(s board and the Man'os plan. Keeping in ind a plan that is #air and reasonable and that "ould ser%e the best interest o# the !reditors and the sto!*holders. They should see* an independent party that "ill a*e an unbiased and #air de!isions and solutions. They should not be deterred by in#luen!es by both parties and be obe!ti%e in rea!hing to a !on!lusion. 5. 6o, the plans "ere #o!used in the redu!tion and paying ba!* the !opanys debt to its !reditors and ban*s, !utting do"n the !opanys !osts, paying o## "ages and bene#its o# eployees. To in!rease the !han!e o# putting &M'( on tra!* they should add plans that are in a!!ordan!e "ith the E': prin!iples. (t "ill help the !opany to ha%e an orderly and systeati! !orporate go%ernan!e #rae"or*. n!e they ipleented a good !orporate go%ernan!e #rae"or*, in%estors "ill be enti!ed to in%est in &M'(. They should also #o!us on the rebuilding the integrity o# the !opany by a*ing !hanges in the top o##i!ials o# &M'( that "ere allegedly in%ol%ed in #raudulent a!ts that tainted the !opany. They should !ondu!t in%estigation to *no" the o##i!ials and eployees that are in%ol%ed in the ebezzleent by appropriating #unds #or personal use and the issuan!e o# unauthorized ;S:s. n!e !on#ired and pro%en, they should reo%e the o##i!ial and ta*e legal a!tions against the. They should also ipleent a plan that "ill dis!lose rele%ant, tiely and a!!urate data about the !opany. (n the said !ase, no one *ne" the e$a!t nuber o# !reditors and the aount o# net assets o# &M'(.