SEC Balks at Allowing PR Holdings to Reduce Capital

Philippine Daily Inquirer
Monday, September 21, 1998
BUSINESS
By Tina Arceo-Dumlao

THE SECURITIES and Exchange Commission has expressed reservations over a plan by PR Holdings Inc., holding company of beleaguered Philippine Airlines Inc., to reduce its authorized capital stock.

SEC officials said it sought another review of the proposed reduction in capital stock in view of the financial troubles that forced PAL to stop operations effective Wednesday.

Stockholders of PR Holdings, which is controlled by Chinese-Filipino taipan Lucio Tan, voted to decrease the total issued shares to lower its capital from P10.1I1 billion to P6.144 billion.

PR Holdings said in its application that it would distribute, on a pro-rata basis, P2.505 billion worth of PAL shares as payment for P3.996 billion worth of shares in PR Holdings that would be retired.

The commission, however, expressed concern over this plan, considering PAL was no longer a viable company because of its hefty P85-billion debt burden and its recent decision to cease operations.

Tan announced this week he would shut down the airline effective midnight on Wednesday after a deal with the union collapsed.

Management had offered the union a 20-percent stake in the company and three seats on the 15-member board in exchange for a suspension of collective bargaining for 10 years.

Such a suspension would prevent future strikes and wage increases and would allow the airline, which has sought protection from its creditors, time to implement a rehabilitation plan to stop the financial hemorrhage.

But the union rejected the proposal, saying they were willing to renegotiate their collective bargaining agreement but would not scrap it completely.

PAL has asked market regulators to appoint a rehabilitation committee to put the company back on its feet.

It is so far the country's biggest casualty from financial troubles spawned by a currency crisis sweeping Asia.

PR Holdings moved for the approval of the capital decrease, saying it has no existing creditors, no pending suit involving money claims and has sufficient assets to sustain operations.

"After the decrease and return of part of its capital, the corporation will remain solvent," PR Holdings said.

The decrease in capital stock will allow the remaining shareholders of the holding firm to retrieve part of the capital invested in the holding firm.