SEC okays Export Bank, Urban Bank merger

The Securities and Exchange Commission (SEC) has approved the proposed merger between Export and Industry Bank (EIB) and debt-ridden Urban Bank Inc. (UBI) as well as its investment arm Urbancorp Investments Inc. (UII).

Designated as the white knight that could pluck the bank out of its financial rut, EIB will be merging with a new bank to be formed out of the merger between UBI and UII within six months of the opening of the new bank.

The merger will give the new entity a projected capital base in excess of P6 billion.

EIB and UBI officials submitted the proposal to the Philippine Deposit Insurance Corp. (PDIC) and the SEC which are overseeing the Urban group’s rehabilitation following its collapse over 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 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 for the pre-merger UBI.

Since UBI is listed at the Philippine Stock Exchange (PSE), the merger will leave UBI as the surviving entity but it will subsequently be changed to Export and Industry Bank.

EIB is a mid-sized commercial bank controlled by the Exporters Confederation of the Philippines (Philexport) with 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 and the SEC 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.

Earlier, the Bank of Commerce said it was not pursuing its bid to acquire UBI due to issues tied to the legality of its closure in April 2000.

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.