Part Two
THIS year property developer Vista Land & Lifescapes Inc. (VLLI) celebrated a decade of being a publicly-listed company. It held a simple ceremony at the Philippine Stock Exchange (PSE) in June.
VLLI needed to celebrate such a milestone after its predecessor firm C and P Homes Inc. took a hit when the Asian financial crisis struck in 1997. The hit wasn’t as swift, but it was a long and arduous one for the company owned by a family that was heavily involved in politics both at local and national levels.
“C&P” represents Camella Homes and Palmera Homes, two of the mass-housing brands of the Villar-Aguilar families that mushroomed within and the outskirts of Metro Manila during the eightees and the ninetees. It was listed at the PSE in 1995. Camella Homes’s operations can be traced back to 1977 through its wholly owned subsidiary, Household Development Corp. (HDC). HDC was a company focused on the development of low-cost standardized housing targeted at homebuyers who rely on government-assisted financing.
At the time, HDC conducted its activities in southern and southwestern Metro Manila, as well as the surrounding areas and its homes under the brand Camella Homes.
In 1983 Camella Homes established a wholly owned subsidiary, Palmera Houses Inc., to focus on real estate development activities in northern and eastern Metro Manila and the surrounding areas.
Camella Homes
IN 1991 Camella Homes widened the scope of its activities to include the development of larger planned-communities with the development of Springville City in Cavite, a development that now encompasses approximately 240 hectares.
In 1993 Camella Homes expanded its operations to include socialized housing developments, marketing these homes under the Carissa brand name.
In July 1997, just when the financial crisis began to sweep Asia, C&P Homes issued a $150-million six-year floating rate notes.
Some two years later in October 1999, C&P declared a default on the debts—meaning it would stop paying the interest on the bonds and that they wouldn’t be paying the principal amount when it becomes due in 2003. The company also defaulted on all its bank debts and peso-denominated commercial papers sold to domestic investors.
When the default was announced, current VLLI Chairman Manuel B. Villar Jr. was the speaker of the House of Representatives.
Villar declined requests for interview for this story.
C&P hired Deutsche Bank, then headed by Joselito Camacho, to be their financial advisor in negotiating a restructuring agreement with its creditors. The bank crafted a restructuring plan for the company’s debt that, on one hand, entailed creditors to take a hit in exchange for equity in the company. On the other hand, the principal shareholders, the Villar family, would have to infuse more capital.
Camacho would later on become finance secretary during the time of former President Gloria Macapagal-Arroyo, who became Philippine president nearly five years after the Asian financial crisis.
Even the Ayala group signified interest in the company but, later, on announced that the deal was off after several months of due diligence. According to a report from nonprofit group Action for Economic Reform, the restructuring plan never pushed through and, instead, the company officials talked to all its creditors one by one, including the banks.
There were also issues on how the Villar family managed to convince creditors on their terms of payment for the loans and also on good governance of C&P itself. But the family was able to bring back the company to its feet.
Those who held on to the notes that the C&P issued in 1997 were paid some of their investments when Vista Land listed by way of introduction at the PSE in 2007.
Listing by way of introduction is defined as not undertaking public offering prior to the initial listing because the marketability of the applicant’s securities can already be assumed. But the company has to make a public offer a year later.
In the case of Vista Land, it acquired all of the assets of C&P, including the firms owned by the Villar family, such as Fine, Polar Property Holdings Corp., Adelfa Properties Inc., Althorp Holdings Inc. and Cambridge Group Inc.
DMCI
A former banker once lumped DMCI Holdings Inc., mainly a construction company that diversified into other businesses, such as on housing and mining operations, as one of the firms that defaulted on their debts when the Asian financial crisis struck two decades ago.
But ask any DMCI official, and he or she would deny that such a thing happened.
“It’s not literally called a default. We’re trying to avoid the word ‘default,’” Herbert M. Consunji, the company’s CFO and executive director, said in an interview.
In 1993 the company started preparing for its initial public offering and scouted a good story for its expansion. Back then, as the Philippine economy struggled to grow, the only way for speedy expansion for a company was to buy another firm.
DMCI, whose name came from the acronym of its founder, the late David M. Consunji, had set its eye on acquiring AG&P, a company that specializes in steel construction.
AG&P is the oldest construction company in the Philippines—it was established in 1900 as Atlantic, Gulf & Pacific Co.—and is known for its iconic constructions, such as the Araneta Coliseum and Rizal Monument.
“They were heavy in steel construction, and DMCI is on concrete construction. So it’s complimentary to us,” Consunji said.
Little did DMCI know that after AG&P was turned over by the Americans to the Filipino owners, the company was mismanaged. It had a lot of unpaid bills to suppliers, even unpaid Social Security System contribution of the employees, retirement pays. A lot of them reportedly sued the company, Consunji said.
We had a difficult time turning around AG&P, advancing several millions of pesos to pay for its debt, he explained. And, remember, it was in the middle of a financial crisis, with oil and gas companies—the main customers of AG&P—either deciding to close shop or scale down their operations, Consunji said.
“It was really a mess. But we bought it; we have to fix it.”
DMCI’s problems didn’t stop there.
To be continued
Image credits: Alysa Salen