Pacific Plans eyes P300-M exit scheme for planholders

Cash-strapped pre-need firm Pacific Plans Inc. needs at least P300 million in fresh capital to allow its planholders the option to encash their entitlements under an exit mechanism that will convert their open-ended plans into a fixed-value plan contract.

In a press briefing yesterday, Pacific Plans spokesperson Atty. Jeanette Tecson said the fixed-value plans will be secured by $51.8 million worth of Napocor bonds which are guaranteed by the government. These bonds, which mature in July 2010 to coincide with the maturity of the government guaranteed bonds, are sufficient to cover all obligations to the company over 34,000 planholders, Tecson said.

Tecson said the terms of the exit mechanism, which forms part of the pre-need firm’s rehabilitation plan, is more advantageous to planholders than those provided under the plan in case of voluntary termination.

For a fully-paid non-availing plan, the entitlement is computed on the basis of seven-percent net per annum yield on the planholders’ contributions from the date of full payment on record.

Upon surrender by the planholders in exchange for the new plans, Pacific Plans will be considered discharged from all obligations.

Tecson said the company is looking at an equity infusion of at least P300 million from prospective investors. "We will talk to anybody who may be interested. For as long as they are serious buyers then we will talk to them."

She, however, admitted that it would be very difficult for Pacific Plans to look for a serious buyer considering its cashflow problems. "There is no serious investor who would like to go into a problematic company."

To provide additional liquidity, Pacific Plans has also proposed to issue preferred convertible shares at 11-percent interest. These preferred shares shall be fully retired in five years.

As part of the rehabilitation process, Tecson said Pacific Plans shall apply with the Securities and Exchange Commission (SEC) for renewal of its dealer’s license and approval of another education plan which is configured to provide adequate, though not complete protection from cost escalation on tuition fees and realistic allowances for standard fees, without unduly risking the viability of the company.

"The market for education plans, particularly in the non-exclusive category, remains robust and could be highly profitable with the right product pricing mix. Benefits shall keep a defined ceiling on tuition and standard fees to keep costs within pricing assumptions," Tecson said.

Tecson said the new education plan shall pay the cost of tuition and other school fees at the time of need, subject to a pre-determined maximum education benefit per year. The plan is payable in five years and will mature on the start of school year following the scholar’s stated birthday.

SEC chairperson Fe Barin said Pacific Plans’ filing for rehabilitation caught the Commission by surprise since the financial statements submitted by the company to the corporate watchdog did not show that the pre-need firm had liquidity problems. "We were surprised to find out that they filed for rehabilitation...Based on unaudited financial statements filed with us, they seemed okay."

Barin, nevertheless, said Pacific’s move was a step in the right direction. "I think it was a good decision on their part. They were candid enough to admit that they have problems. This only goes to show that they are doing something about their financial problem."

Barin said while the court now has jurisdiction over Pacific Plans, the SEC can still intervene to ensure the protection of the pre-need firm’s thousands of planholders. "We may intervene to make sure that rights of creditors are protected."

Pacific Plans filed for rehabilitation with the Makati Regional Trial Court as it foresees the impossibility of meeting future claims of planholders owing to rising tuition fees.