CAP seen to finalize talks with foreign investor in 30 days

Leading pre-need company College Assurance Plan (CAP) Phils. Inc. is hopeful it would be able to conclude negotiations with its prospective foreign investor within the next 30 days, beating the September deadline set by the Securities and Exchange Commission (SEC).

In an ambush interview, CAP director Robert John Sobrepena said they are optimistic of reaching a deal with its potential partner by early next month as both parties are just awaiting certain documents for the transaction.

Sobrepena said the foreign group’s investment will make up a third of CAP’s outstanding capital stock. The entry will be made through the subscription of preferred shares, he said.

Earlier, an SEC official said the commission’s September deadline for CAP to look for fresh capital infusion was very crucial as this would set the direction in the pre-need firm’s future financial status.

The official said should CAP fail to reach an agreement with any investor, the SEC would not renew its license, preventing it from selling new plans.

CAP is currently in talks with three foreign investor groups for the possible infusion of $100 million in fresh equity into the company.

The $100-million infusion is part of the SEC-approved asset build-up program that CAP is undertaking in its effort to match the future deficiency in its trust fund with the growth of its assets.

CAP earlier said it will be able to beef up its assets to as much as P20 billion in the next 30 years, which should be more than enough to cover all obligations to planholders.

The company, in fact, is projecting a P3-billion surplus over a 30-year period, instead of a P17-billion deficiency or variance in its trust fund, if trustee banks would adjust the valuation of the company’s assets.

As of end-December last year, CAP only had P8.41 billion in trust assets managed by trustee banks versus an actuarial reserve liability of P25.6 billion.

The asset build-up program will include the conversion of assets to equity to be added to the trust fund, generation of interest income from loan programs, raising dividend income and securing fresh equity from interested investors.

Also part of the capital build-up program is the inclusion of its interest income from a loan program dividend income and others.

Other measures aimed at plugging the trust fund deficiency include recognizing the value of developed properties which were previously valued when they were still undeveloped; recognizing real estate inventory or unsold land at the end of five years including outstanding accounts receivables at the end of five years from its real estate development projects; recognizing a portion of the MRT bonds that are not reflected in its financial statements; and recovering an investment in Fil-Estate Management Inc.

The company is also counting on the P1-billion bonds subscribed from Systems Technology Institute (STI), constituting non-interest bearing certificates that give holders academic entitlements to any of STI Colleges or its affiliated educational entities upon redemption on certain designated redemption dates which range from between four and 19 years from issue date.

CAP emerged as the top player in the pre-need industry for 2003. The SEC’s list of the top 5,000 Philippine companies, in fact, showed CAP ranked at number one among pre-need firms and 227th overall.

As of end-December 2003, CAP added some 35,525 new planholders and has paid a total of P10.2 billion in tuition fees for all its scholars.

CAP had gross sales of P2.38 billion from educational plans and P1.8 billion from pension plans. Total assets amounted to P30.2 billion as of December last year.