Lafayette Phils braces for foreclosure

Lafayette Philippines Inc. (LPI) has confirmed reports that its creditor banks are considering a foreclosure of the mining company’s property in Rapu-Rapu, Albay if it fails to re-start its interrupted polymetallic mining project.

"Foreclosure by the creditor banks of Lafayette is a possibility in the near term as a result of the delay in the project’s restart that was originally scheduled in mid-March. The project is losing P150 million per month in the past six months in terms of its maintenance. The banks and investors are worried about the uncertainty of a restart even after the company had declared it had already fully complied with all the governments requirements and conditions," LPI said in a statement.

Company sources said they are concerned their creditor banks will sequester the mining firm’s property unless it re-opens. Its mining operations was stopped last October by the Department of Environment and Natural Resources (DENR) when its mine tailings spilled over from its tailings pond to the water tributaries in the area.

"If the banks seize control over our property in Rapu-Rapu, it becomes the banks’ property and subsequently, shareholders’ value will disappear," said a company official who requested anonymity.

LPI has not been able to service its outstanding debts to its creditors since the stoppage of its mining operations.

LPI’s exposure include a $35-million debt financing facility, a A$140- million hedged market to market exposure and a A$60-million metal forward contract liability. Its creditors had given it two weeks, ending next week, to resolve its problem.

The company has been requesting the government to allow it to reopen its Rapu-Rapu polymetallic project and assured that the reopening would merely involve "testing and commissioning" of the idled plant and would not involve resumption of full scale mining operations.

Earlier, the company said it complied with all 21 conditions imposed by concerned government agencies.

DENR Secretary Angelo Reyes however, said he will wait for the results of the Rapu-Rapu fact finding commission before deciding on whether or not to allow LPI to resume its operations.

The delay has reportedly created a lot of uncertainty, specially for foreign investors and banks.

If the banks decide to take action against Lafayette, it could lead to a permanent closure which could mean an investment loss of $259 million consisting of $43.4 million in bank loans, $39.5 million in shareholder advances and $176.1 million in bank hedging exposures.