CAP expects fresh funds by September

College Assurance Plan Phils. Inc. (CAP) is holding talks with several groups of foreign investors, including a Hong Kong-based company, for possible equity infusion as it expects new funds to come in by September, a top company official said.

CAP first vice-president Bobby Café said the pre-need firm expects to receive $4 million a year over a period of five years from St. Augustine, a humanitarian foundation based in Europe. In exchange, CAP will issue a bank-to-bank authenticated message of an asset safekeeping receipt over its Metro Rail Transit (MRT) bonds.

Café said the face value of the MRT bonds is worth $81 million. At the end of five years, he said the bonds will revert to CAP.

He said the group is still hoping to forge a deal with Europe-based fund manager International Global Capital Holdings AG. It was earlier reported that IGCH would infuse around P1 billion in fresh equity into CAP.

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.

Café said CAP is also holding negotiations with a Hong Kong-based firm for the infusion of fresh capital.

He, however, declined to name the prospective investor pending completion of talks.

Café added the pre-need firm has also revived talks with the North American marketing firm that earlier expressed interest to invest in CAP. The marketing firm, however, will invest only when CAP has reacquired its dealership license from the Securities and Exchange Commission (SEC).

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

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

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

CAP is hoping to raise its capitalization to P20.8 billion over a period of eight years as part of its recovery program intended to address its liquidity problems.

The build-up program will include 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.

The plan also involves the institution of cost-cutting measures to enhance operating efficiency and contain its liabilities.

CAP insisted that there is no sufficient ground for it to be placed under the SEC’s management control as it foresees no imminent danger of dissipation, loss, wastage or destruction of assets.

Aside from the uncontrolled tuition increases brought about by deregulation, CAP blamed the SEC’s "adamant and erroneous application of the Pre-Need Uniform Chart of Accounts (PNUCA) since 2002" as a factor in its trust fund deficiencies.

CAP said the SEC should have instead used International Accounting Standards 39, the standards used worldwide which properly classifies pre-need plans and pension products as investment contracts rather than insurance contracts.

CAP also pointed to the absence of a dealer’s license as the reason behind its failure to secure additional funding.

CAP said it is "hopeful that despite the negative publicity against it and the apparent prejudgment of its case, the SEC would see its way clear through allowing CAP to run its business subject to reasonable regulations instead of placing it under management committee which would eventually lead to liquidation at the expense of its thousands of planholders."

CAP issued the statement in response to the show-cause order issued by the SEC for alleged violation of the rules on the sale and registration of pre-need plans which include unauthorized issuance of plans worth P325 million as of Aug. 31, 2004, non-settlement of penalties amounting to P1.08 million, and non-filing of reportorial requirements with the SEC.

CAP has been on the SEC’s watchlist since 2001 after incurring a huge trust deficiency. SEC records showed that CAP’s trust fund stood at only P4.7 billion as of March this year.

SEC chairperson Fe Barin said the commission will review the filings made by CAP and decide in due time on what to do with the troubled pre-need firm.

The SEC collegial body earlier approved a proposal for a management takeover of CAP following a careful review of the terminal report prepared by an SEC oversight committee. The creation of the mancon was necessary to prevent further erosion of the pre-need firm’s assets, which according to the SEC official, are mostly made up of real estate properties.

The en banc’s decision took into account CAP’s failure to beef up its trust fund and the mounting complaints that the agency has been receiving against the company.

In April, a group of CAP planholders lodged a complaint against the pre-need firm, saying CAP’s liquidity problem had been caused by mismanagement. Planholders sought the nullification of their policies, the return of their investments, and the appointment of a mancom.