Canadian firm eyes Platinum Plans

A Canadian firm has offered to buy out Platinum Plans Inc. from the Salas family, the cash-strapped pre-need firm disclosed in its rehabilitation plan filed with the local court.

Platinum, however, said it cannot predict the prospect of closing the deal with the unidentified Canadian investor due to the current controversies and the consequent operational and financial difficulties of the pre-need firm.

The pre-need firm said the prospect of getting a white knight will require a period for normal due diligence. "This is best done under a rehabilitation climate with the supervision of the court and receiver so that the terms and conditions that will be discussed can have legal stability and protection," Platinum said.

Platinum pointed out that getting a foreign investor will strengthen not only the company but restore credence and confidence in the pre-need industry as well.

According to the pre-need firm, its existing long-term commitments to planholders will be better protected with new resources and management.

Aside from searching for a white knight, Platinum also needs to source P75 million in fresh funds to settle maturing plans.

Platinum also plans to offer a new program involving a homeowning system addressing the contractual savings capabilities of overseas Filipino workers and developing non-performing assets of banks suitable for housing from which the pre-need firm can earn a hefty income of as much as P2.2 billion from just one specific property.

The need to venture into a new business is due to the absence of Platinum’s dealership license for 2005.

The Securities and Exchange Commission (SEC) is looking into the possible filing of criminal charges against Platinum for alleged mismanagement and misappropriation of funds that eventually led to the collapse of the pre-need firm.

SEC chairperson Fe Barin said the filing by Platinum Plans of a petition for suspension of payments with the court will not stop the commission from investigating the pre-need firm and imposing whatever sanctions as may be necessary.

Platinum sought a moratorium on the payment of its debts to allow it to map out a viable recovery plan. The company believes that given enough breathing space it would be able to settle all maturing obligations given the realizable value of its existing assets.

In its petition, Platinum said it could settle only up to P75 million of its maturing obligations to plan holders. The pre-need firm intends to sell assets to raise funds to cover obligations to planholders.

The SEC has been receiving complaints from the public against Platinum for delayed or non-payment of maturing obligations. The pre-need firm has also been accused of issuing bouncing checks.

Based on SEC records, Platinum has an actuarial reserve liability (ARL) of P470.1 million as against trust fund assets of P192.76 million, resulting to a trust fund deficiency of P277.34 million. Platinum has also been found to have failed to remit monthly deposits to its trust fund in violation of the rules of pre-need firms. The firm’s trust fund is made up mostly of real estate.

Apart from this, the pre-need firm was found to have failed to submit its audited financial statements and actuarial valuation report for 2004.

Platinum is among the 12 pre-need companies on the SEC’s watchlist. Others being monitored closely by the SEC include TPG Corp., Prudential Life Plans, PET Plans, Eternal Plans, Eduplan Phils., Legacy Consolidated Plans, Pryce Plans, Trusteeship Plans, and Scholarship Plan Phils.

An SEC official, however, clarified that not all these firms have liquidity problems. These firms, the SEC source said, are being monitored because they offered open-ended plans.

In open-ended plans, a pre-need firm pays the tuition of a beneficiary regardless of the amount. Before 1992, tuition increases were limited to no more than 15 percent each year. When tuition were deregulated in 1992, most of the pre-need companies stopped selling open-ended educational plans.

The 12 pre-need firms offered a total of 796,263 open-ended plans worth P30.037 billion. When combined, the ARL of these companies amounted to P32.76 billion.

The ARL is the present value of all current and future tuition availments. It is based on inflation, interest rates, and expected tuition increases, among others. A measure of how healthy a pre-need company is whether its trust fund is equal to or exceeds the ARL.