Nenaco asked to prove compliance with SEC rules

Debt-saddled Negros Navigation Co. Inc. will have a lot of explaining to do to convince the Securities and Exchange Commission that it had complied with the agency’s full disclosure rules.

Preliminary results of an audit conducted by the SEC to determine the veracity of Nenaco’s third quarter report showed that the company could have engaged in misrepresentation. The audit was conducted in lieu of the motion for reconsideration filed by Nenaco with respect to the fine imposed on it by the SEC’s corporation and finance department.

"In their third quarter report filed with the SEC, they painted a rosy picture but after a few months, they filed a petition for suspension of debt payments and corporate rehabilitation," SEC general accountant Roberto Manabat said.

Manabat said he will make the necessary recommendation as to what course of action to take against Nenaco.

It would be recalled that Tsuneishi Heavy Industries Inc., to which Nenaco owes over P100 million, had accused Nenaco of altering its financial statements to avoid repayment of its loans. The company alleged that the press releases issued by Nenaco did not reflect the true nature of their financial condition.

"Their press releases painted they were successful and making money when their books did not reflect their real financial position. They have many unpaid accounts with suppliers including fuel companies and are placed on a cash-on-delivery basis," Tsuneishi earlier said.

Nenaco, however, maintained that it "consistently and responsibly fully discloses its entire financial records as required by the relevant regulatory agencies, in accordance with the highest accounting standards."

The debt-ridden firm earlier disclosed that it had tapped Sycip Gorres Velayo and Co. to conduct a third-party audit on its books and records to disprove allegations it had misrepresented its financial condition.

The purpose of the audit is also to reconfirm the entries in Nenaco’s balance sheet that do not match the claims of the creditors.

Early this month, Nenaco was slapped with a P75,000 penalty by the SEC for failing to make an accurate and complete disclosure of its true financial condition.

In particular, Nenaco was fined for its failure to comply with Section 17 of the Securities Regulation Code, which requires all listed corporations to disclose any unknown trend, event or uncertainty that might adversely affect their financial standing.

In a letter to the SEC, Nenaco president Conrado A. Carballo reiterated that it had nothing to report at the time it submitted its third quarter report for 2003. However, he said the company’s disclosure that it was negotiating for the restructuring of its debts was a clear indication of liquidity problems in the event that negotiations failed.