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EIB
Realty Developers Inc., formerly Urbancorp Realty
Developers Inc., is taking the first important step in
retracing its way back to profitability: it will undergo
quasi-reorganization, which has been approved by its
board and tap the public for more money.
Quasi-reorganization involves the reduction in the par
value of a company’s capital stock, a corporate act
which is primarily intended to erase deficits with the
resulting reduction surplus, followed by the increase in
authorized capital stock.
In the
case of EIB Realty, its board went for a par value of
P0.18 to replace its existing par value of P1, and an
expanded capital stock of 50 billion shares, or P9
billion at P0.18 per share, up from 2 billion shares at
P1 per share. From its new capital stock, EIB Realty
plans to raise P5 billion through follow-up offering at
P0.18 per share.
*****
Reduction surplus.
At P0.18 par value, EIB Realty will have outstanding
capital of P246,257,135.86 (rounded to P246,257,136)
instead of P1,368,095,199. The capital restructuring
will result in a reduction surplus of P1,121,838,063, an
amount more than enough to wipe out a deficit of
P1,104,916,510 as of March 31, 2007.
EIB
Realty was incorporated on August 10, 1994 and listed
its shares on the Philippine Stock Exchange on March 19,
1996 after selling 701 million shares and raised P835
million to pay some debts, which it should have paid in
1995. Its shares were last traded on May 24, 2007, when
it closed at P0.27. It hit a 30-day high of P0.28 and
recorded a 30-day low of P0.205. Trading on its shares
was suspended beginning May 28, 2007 leaving its over
2,000 small stockholders unable to unload until the
completion of its capital restructuring.
Export
Bank owns 981,699,815 EIBR shares, or 71.7567 percent.
PCD Nominee Corp. holds 209,002,835 shares, or 15.2769
percent, for Filipino stockholders and 6,481,250 shares,
or 0.4737 percent, for foreigners.
*****
Man
onboard.
In 2004, Reynaldo G. David, who is now president of the
government-owned Development Bank of the Philippines,
resigned from the board of EIB Realty. He was replaced
by Josue A. Camba Jr., who eventually became the
president of the company.
As the
new head of EIB Realty, Camba, a former president of the
Financial Executives Institute of the Philippines and
chairman of the Capital Market Development Council,
faces a very difficult challenge in the mandate given
him and his management team by the board—putting back on
stream a financially distressed property company, which
is a former unit of the Urban Bank group.
EIB
Realty has been in the red for years. It reported losses
of P126,315,004 in 2006; P8,280,432 in 2005; and
P4,483,877 in 2004. These resulted from revenues of
P8,687,781 in 2006; P8,429,436 in 2005; and P8,624,435
in 2004. These losses led to the accumulation of
deficits of over P1billion.
Definitely, with these accumulated deficits, EIB Realty
needs funds very badly and it wants to turn once more to
the public for more capital. Camba is well aware that
investors will not buy shares should he and his team
fail in their efforts to reverse the company’s losing
financial performance. He also knows from his long
years in the market as an investment banker that the
usual question raised by minority stockholders when a
company goes down is: when will the most awaited full
rehabilitation of the company take place? Whether or not
the answer or answers are forthcoming, one thing certain
is that the public won’t bite anymore into shares
offering if their money won’t be spent for operations
and instead will be used to pay old debts.
Camba
surely knows this. |
