Nenaco in danger of losing license to sell securities

Debt-saddled shipping firm Negros Navigation Co. Inc. (Nenaco) stands to lose its secondary license or permit to sell securities if it fails to convince the Securities and Exchange Commission (SEC) that it has complied with the agency’s full disclosure rules.

An SEC official said the Corporation Finance Department will summon Nenaco officials to a hearing to explain the perceived flaws in the firm’s financial reports.

"We will call them to a hearing to defend their liquidity position. If they fail to come up with a satisfactory explanation, we might revoke their registration statement," the official said.

Preliminary results of an SEC audit to determine the veracity of Nenaco’s third quarter report showed that the company may 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 CFD.

A few months after it filed its third quarter report last year, Nenaco filed in court a petition for the suspension of debt payments and corporate rehabilitation.

Cebu-based Japanese ship repair firm Tsuneishi Heavy Industries Inc. had earlier accused Nenaco of altering its financial statements to avoid repayment of its loans.

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 shipping firm also disclosed that it had tapped Sycip Gorres Velayo and Co. to conduct a third-party audit of its books and records to disprove allegations it had misrepresented its financial condition.

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

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

In an earlier letter to the SEC, Nenaco president Conrado A. Carballo reiterated that it had nothing to report at the time it submitted it 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.

Carballo said the event which had a material effect on Nenaco’s liquidity was the issuance on March 5, 2004 by the Cebu Regional Trial Court of a writ of preliminary attachment against the shipping firm’s properties which resulted in the grounding of one of its vessels.

The writ of attachment was in response to the petition filed by Tsuneishi.

Tsuneishi was Nenaco’s former partner until the latter failed to pay for repairs on its vessels and for ship drydocking since 2002. Tsuneishi claimed that Nenaco failed to honor its promises to pay its more than P100-million debts despite the restructuring and rescheduling of the account.

In its debt restructuring proposal, Nenaco sought a one-year grace period on interest payments and a three-year grace period on the principal amount.

Among Nenaco’s creditor-banks include the Development Bank of the Philippines (P350.54 million), Bank of Commerce (P127.65 million), Equitable-PCIBank (P51.56 million), Export and Industry Bank (P29.01 million), Prudential Bank (P37.77 million), Metropolitan Bank and Trust Co. (P10.73 million) and Dutch firm Debis Financial (P108.22 million).