Export Bank set to finalize Urban Bank reopening

The Export Industry Bank (EIB), a so-called "‘white knight" that aims to rescue Urban Bank, hopes to sign a memorandum of agreement (MOA) this week with the Philippine Deposit Insurance Corp. (PDIC) and the National Association of Urban Bank Inc. and Urbancorp Investments Inc. Depositors and Creditors (NAUD).

Urban Bank was placed under the receivership of PDIC in April 2000 after it declared a bank holiday and was later found insolvent and illiquid.

The accord in effect recognizes the rehabilitation plan of Urban Bank as presented by EIB and NAUD. The MOA when signed is expected to trigger a series of activities leading to the reopening of the bank by end August.

Likewise, the MOA in effect recognizes the functional merger between Urban Bank Inc. or UBI (owner of the commercial bank), Urbancorp Investment Inc. or UII (investment arm of Urban Bank Corp.) and EIB.

EIP president Benjamin P. Castillo said the true surviving entity will be EIB but the legal surviving entity will be Urban Bank which is listed at the Philippine Stock Exchange (PSE), a situation they want to retain.

"Upon the formal recognition through the agreement, we will immediately advise the PSE board of our plans to change the name to Export Industry Bank," he added.

The process will also involve the Securities and Exchange Commission (SEC), which was not only the receiver of UII. The merger also involves three corporate entities and billions of pesos not to mention the positive impact it has on the banking community.

Before the MOA will be signed, however, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has to approve the rehabilitation plan. Officials of EIB and NAUD are optimistic of getting the MB nod "since the BSP has been part of the entire process from the start."

EIB expects its biggest hurdle to be that of getting a 100 percent approval from the creditors and depositors of UBI and UII.

EIB officials said they have posted a performance bond with the PDIC amounting to P3 million. The bond is an "insurance" that EIB will not abandon the rehabilitation of Urban Bank in midstream.

The bond allows for the withdrawal of the white knight without penalty should the rehabilitation disintegrate due to the non-cooperation of some creditor or depositor. "It is crucial that the bank (EIB) gets the 100 percent approval of all parties involved," the officials said.

Castillo told The STAR that they have almost hit the 90-percent mark, and that the NAUD is fully cooperating and assisting in getting the remaining minority individuals and corporations to give their approval.

"Fortunately, the three major depositors have fully cooperated since the start," they said, referring to Petron Corp., San Miguel Corp., San Miguel Corp., and the Manila Electric Co. (Meralco) which have a combined exposure of over P3 billion.

The three major depositors agreed to convert 25 percent of their combined exposure, or roughly P750 million, into a long-term loan with an interest rate of 7.5-percent net of taxes.