Urban Bank reopening hinges on resolution of legal issues

Bank of Commerce (Bancommerce) said yesterday it remains committed to the rehabilitation of Urban Bank Inc. (UBI) although the former considers it prudent to proceed with the plan only if all the legal issues are resolved with finality.

In a letter to Philippine Deposit Insurance Corp. (PDIC) president Norberto Nazareno and Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura last Tuesday, Bancommerce president Raul de Mesa reiterated his bank’s desire to fulfill its obligations under the rehabilitation plan it is proposing as soon as this is confirmed by the pertinent government agencies.

However, De Mesa expressed apprehensions over the successful implementation of Bancommerce’s impending merger with UBI and Urbancorp Investments, Inc. (UII) owing to various legal issues that have recently been filed with the courts on the closing of UBI.

He expressed the opinion that all these legal issues have to be clarified first.

De Mesa said the Bancommerce plan has been approved by over 90 percent of the depositors and creditors of UBI and UII, as well as the support of the Social Security System (SSS) and large depositors, San Miguel Corp., Meralco and Petron Corp.

De Mesa recalled that Bancommerce was picked by PDIC to rehabilitate UBI over the other bidder, Asian United Bank (AUB). PDIC evaluated the bids with the help of its consultants, KPMG Laya Mananghaya and former PDIC president Vitaliano Nanagas.

Bancommerce, based on the evaluation, had a superior rehab proposal which included among others a three-year payback term as compared to the seven years offered by AUB.

Bancommerce also had the support of the majority of the UBI shareholders and was willing to include UII in the rehabilitation as against AUB’s offer, which covered only UBI.

He said that on Dec. 13, 2000, the SSS, in a resolution, affirmed its earlier resolution of May 31, 2000 approving its support to the rehab plan being proposed by Bancommerce by way of a P600-million investment in convertible bonds of Bancommerce.

Prior to this, he recalled that sometime in late May 2000, the board and the senor management of UBI were informed by PDIC that they were given 90 days from the time of the bank’s closure to come up with a viable rehabilitation plan or the bank will be liquidated as mandated by the PDIC charter. It was at this time that a group of shareholders and senior officials of UBI approached De Mesa to study the possibility of putting together a rehab plan for UBI’s rescue.

He said that on June 9, 2000, Bancommerce signed a memorandum of agreement (MOA) with a group of UBI directors representing majority of UBI’s shareholders. The group representing UBI’s majority shareholders included UBI chairman Arsenio Bartolome, UBI president Ted Borlongan and directors Benjamin de Leon, Juvencio Dizon, Eric Lee, Ferdinand Lim and Carlos Salinas. The MOA was signed to formalize the two parties’ joint efforts to structure a rehab plan for UBI in the form of a merger, with Bancommerce as the surviving entity.

Originally, based on Bancommerce’s initial due diligence work, it was BOC‘s position that all creditors and depositors of UBI and UII shall be paid in lump sum at the end of five years from reopening without any interest. This was arrived at after Bancommerce saw that almost the entire portfolio of UBI/UII were in real estate loans or real estate investments which would take time to liquidate given the depressed market which continues to this day.

He said that further negotiations with the majority shareholders of UBI as well as certain large institutional depositors were made by Bancommerce, and with the welfare of the depositors and creditors as the primary concern, Bancommerce, submitted a rehab plan to the PDIC which essentially included the serving of UBI’s liabilities over a three-year period.

He added that on July 13, 2000, Bancommerce signed a MOA with San Miguel Corp., Petron Corp. and Meralco which essentially spelled out the three companies support to the rehab plan by way of their agreement to convert about P750 million of their combined exposure in UBI/UII into quasi-equity. – Ted Torres