CAP in talks with local group for P1-B equity infusion

College Assurance Plan Phils. Inc. (CAP) is in talks with a local financial services group for the possible infusion of P1 billion in fresh equity as part of hardline efforts to strengthen the pre-need company’s trust fund.

At the same time, CAP director Robert John Sobrepeña said the pre-need firm expects to receive around P1 billion from Europe-based fund manager International Global Capital Holdings AG following the issuance of a bank-to-bank authenticated message of an asset safekeeping receipt (ASKR) over CAP’s MRT bonds.

The ASKR serves as a confirmation that CAP has such assets. Without an ASKR, investment banks would have to conduct extensive due diligence on a company to determine asset valuations.

"The ASKR is now ready. Funds will be coming in. The trustee bank has already approved it. The funds to be received are in the vicinity of a billion pesos," Sobrepeña said.

IGCH is primarily involved in financial management and is registered in Vaduz, Liechtenstein. It is affiliated with all top 50 Western European banks, including Swissfirst Bank AG.

Sobrepeña said the prospective local investor has made an offer to inject as much as P1 billion in fresh equity on the condition that CAP secures a dealership license with the Securities and Exchange Commission (SEC).

The SEC has not renewed CAP’s dealership license since last year due to the pre-need firm’s failure to beef up its shrinking trust fund.

According to Sobrepeña, the prospective investor wants to tap CAP’s extensive distribution or marketing network.

He said CAP will issued preferred shares in exchange for the equity infusion.

"It’s better we finish the global deal first. After the equity infusion, we will resolve the issue on the variance," Sobrepeña said.

Sobrepeña said with the fresh equity infusion and the reduction of its variance, CAP will apply for the renewal of its dealership license with the SEC.

Sobrepeña also announced the appointment of two new directors on the board of CAP, namely former Solicitor General and Ambassador Raul Goco and Siliman University president and former Presidential Commission on Good Government commissioner Quintin Doromal.

On his election to the board, Goco assured planholders that CAP will not default in its obligations. "We’re here for the interest of planholders. No single planholder will be prejudiced. We will not be in default. We will make sure that CAP complies with all its obligations to planholders," he said.

Sobrepeña, for his part, said CAP remains committed to fulfilling its obligations to thousands of its planholders.

As of end-2003, CAP’s actuarial reserve Liability or ARL stood at P25.7 billion while the trust fund which serves as the guarantee the pre-need firm would be able to meet future obligations is only P8.5 billion. This has resulted to a trust fund deficiency of P17.2 billion. The ARL is the present value of the pre-need firm’s future liabilities.

Also part of the pre-need firm’s asset build-up program is the conversion of assets to equity which would be added to the trust fund, generation of interest income from loan programs, raising dividend income and securing fresh equity from interested investors.

Other measures aimed at plugging the company’s 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.