Urban Bank, Exportbank merger eyed

The lone group that offered to rehabilitate and reopen Urban Bank Inc. (UBI) and its investment arm, Urbancorp Investments, Inc. (UII), will seek a merger with the designated "white knight," Export and Industry Bank (EIB), before the end of the year.

Josue Camba, president of the National Association of UBI/UII Depositors and Creditors (NAUD), and Exportbank chairman Sergio Ortiz-Luis Jr. said an integral feature of their proposed rehabilitation plan is the eventual merger of the new bank with Exportbank within six months from opening, but not later than the end of 2001. The merger will result in a projected capital base in excess of P6 billion.

The officials submitted the proposal to the Philippine Deposit Insurance Corp. (PDIC) and the Securities and Exchange Commission (SEC) which are overseeing the Urban group’s rehabilitation following a bank run-induced collapse almost a year ago.

"We believe that the enclosed plan is a most viable and superior plan that addresses the various concerns of all the stakeholders of UBI/UII and EIB," the officials said.

The plan is anchored on the conversion of at least 10 percent of the deposits and placements with UBI and UII involving at least P1.25 billion, and the participation of EIB as the "white knight" with an initial capital infusion of P300 million in the new bank.

After full provisioning for non-performing loans, the new capital base of the new bank, inclusive of all the capital infusions and conversions into equity delineated in the plan, is projected to result in a new equity base of over P3.7 billion, the officials said.

They added that since UBI is listed in the stock exchange and the immediate marketability of the new equity is assured, the eventual merger will have UBI as the surviving entity to be subsequently changed to Export and Industry Bank.

EIB is a mid-sized commercial bank controlled by the Exporters Confederation of the Philippines (Philexport) and its foreign partner the Lippo Group of Indonesia.

"We also believe that with the government’s support, and the precedent-setting active participation of depositors and creditors, this rehabilitation will go a long way in the national effort for a stable financial system and accelerated economic development," the officials emphasized.

The Urban group is still under a debt relief program with the SEC but this is set to expire on May 8. The corporate regulator has extended UBI’s debt payment suspension five times since the troubled bank has not come up with an acceptable rehabilitation plan along with strategic investors.

Last Feb. 22, the Bank of Commerce said it was not pursuing its bid to acquire UBI due to issues tied up to the legality of its closure in April last year.

UBI declared a bank holiday and sought refuge at the SEC and the PDIC following a massive bank run which crippled its ability to cover its deposit liabilities of more than P8 billion.