CAP asks regulator for more time to snag investor (BusinessWorld)

Published in the August 2, 2004 issue of BusinessWorld

CAP asks regulator for more time to snag investor

By JENNEE GRACE U. RUBRICO, Senior Reporter

Pre-need company College Assurance Plan Philippines, Inc. (CAP) has asked the Securities and Exchange Commission (SEC) for more time to negotiate with foreign investors for the infusion of $100 million.
SEC Chairman Lilia R. Bautista said in a press conference that CAP wrote a letter to seek an extension since talks are still ongoing.
CAP had earlier said it was in talks with three investors -- two Asian and one North American -- for the infusion of $100 million. The infusion is one of CAP's measures to address the huge difference between its actuarial reserve liability and its trust fund, or assets. The actuarial reserve liability refers to the projected future liabilities for pre-need plans maturing at a given time.
CAP was given until end-July to identify a foreign investor that would put in the equity it needs to fund its PhP3.4-billion requirement for the year.
"CAP wrote us. They're asking for another month. They said they are not finished negotiating yet, so they can't give us a name [of an investor] yet," Ms. Bautista said.
She said the SEC doesn't know who the three foreign investors are. However, CAP officials have reportedly visited China and Hongkong recently.
Ms. Bautista said if CAP does not give the SEC the name of an investor by September, it will compel the company to meet with investors that have expressed interest in investing in CAP.
"If they don't get any investor, we'll have to ask them to meet with our investors. All we are asking for is a name. By October, school will be resuming. It will again be a time to pay fees," Ms. Bautista said.
She said among the investors that approached the SEC for CAP is a European investment bank, which is represented by a Filipino party. The European investor, she said, is proposing a takeover of CAP.
"Maybe this is why CAP wants to look for its own investor," she added.
CAP had earlier reported a PhP17-billion discrepancy in its trust assets as of end-2003.
The company has only PhP8.4 billion in trust assets, compared with an actuarial reserve liability of PhP25.5 billion.
CAP is one of the pre-need companies that were given regulatory leeway by the SEC. Among the pre-need firms that asked for regulatory leeway, CAP had the biggest discrepancy.
A regulatory leeway is intended primarily to give pre-need companies a reasonable transition to address the discrepancy between their actuarial reserve obligations, or projected future liabilities. The discrepancy, or trust variance, results from SEC's requirement for pre-need companies to use realistic and attainable interest rate assumptions in the valuation of their liabilities.