Ownership limit breaches tagged (BusinessWorld)

Published in the July 27, 2007 issue of BusinessWorld

BY JENNEE GRACE U. RUBRICO, Sub-Editor

Ownership limit breaches tagged

SIX LISTED COMPANIES have exceeded constitutional caps on foreign ownership while three others are at the limit, the Philippine Stock Exchange (PSE) yesterday said, even as it left a decision on whether sanctions were merited to corporate regulators.

In a circular for brokers, the PSE said it had been informed of the ownership limit breach by Philippine Depository & Trust Corp. after transfer agents rejected requests to reclassify some
of these firms’ shares to non-Filipino from Filipino.

The companies were identified as Megaworld Properties & Holdings, Inc., Philippine Racing Club, Mabuhay Holdings Corp., Edsa Properties Holdings, Inc., Ayala Land, Inc., and Asian Terminals, Inc.

The firms, which are in property development, power, and transportation, are all required to
limit foreign ownership to 40%.

“According to the transfer agents, these issues have already breached their foreign ownership limits,” the Philippine Dealing System group said in a letter to the bourse.

Three others, meanwhile – Ayala Corp., ATR Kim Eng Financial Corp., and Mabuhay Vinyl Corp. – were said to have hit the foreign ownership ceiling.

Company representatives reached by BusinessWorld denied that the constitutional caps had been exceeded, with the Securities and Exchange Commission said it would consider the matter.

The PDS said Megaworld had been in breach since February 2007, while Philippine Racing Club and Mabuhay Holdings went past the limits in 2005. Edsa Properties, and Asian Terminals, meanwhile, have allegedly been violating foreign ownership restrictions since June 30, 2007, while ALI has been above the limit since July 10.

In a telephone interview, PSE President Francis Ed. Lim said the companies would not be penalized for the alleged breach in the foreign ownership limits.

“This was discovered by accident but it has already been sorted out,” he said.

Another PSE official, meanwhile, said that the PSE could not penalize the firms because can only monitor breaches in constitutional limits.

“The PSE has nothing to do with it (penalizing companies), he said, but added that a breach in foreign ownership limits was a “constitutionality problem”.

Companies, he said, may be penalized if a party files a complaint or if the Securities and Exchange Commission decides to look into the matter.

SEC Commissioner Jesus Martinez, for his part, said that he had yet to see the PSE circular. But he said that generally, companies that breach the foreign ownership limits could be prosecuted and subjected to monetary penalties.

“If there is a constitutional violation ... prosecution will be considered in any light,” Mr. Martinez, who oversees the market regulation division, said.

He added that the gravity of the penalty would depend on how long the firms have been going past the constitutional limits. He said penalizing firms would be the last resort.

“There could be a show cause order and companies will be asked to explain,” he said.

The firms, however, denied having violated the constitutional provisions on foreign ownership.

“We already told them (the PSE) that [the] bulletin is wrong. In the system of the transfer agents, when ever a sale breaches, it’s not allowed in the system. The certification from our transfer agent, RCBC (Rizal Commercial Banking Corp.) said that as of June 30, we were at 39.8% ... we didn’t even reach 40%,” Federico Noel, Edsa Properties corporate secretary, said, adding that the company already “called the attention of PSE.”

He also said monitoring foreign ownership limits was the lookout of listed firms’ transfer agents, and that “the company will not know because it’s traded.”

ATI president Eusebio H.Tanco, meanwhile, said there wasn’t really a breach because the stakes bought by foreign investors over the cap are not registered. He also said that while stock transfer agents monitor the shareholdings of foreign investors in ATI, “this is not seamless.”

“Sometimes, when foreigners buy, they exceed. But we are monitoring this and we are addressing the problem,” he said.

Megaworld, for its part, said changes in its ownership structure have kept foreign ownership in the firm well within limits.

“The Securities and Exchange Commission has acknowledged the filing of the Certificate of Adoption of the Enabling Resolution passed by the Board of Directors of Megaworld on July 18, 2007, authorizing the issuance to Alliance Global Group, Inc. of 6,000,000,000 voting, cumulative, non-participating, non-convertible and non-redeemable Series “A” Preferred Shares worth P60 million,” Megaworld said in a statement.

“After issuance of the Shares to Alliance Global Group, Inc., Megaworld now has 26,641,646,901 shares consisting of 20,641,646,901 common shares with par value of P1.00 per share and 6,000,000,000 preferred shares with par value of one centavo per share. Out of the 26,641,646,901 outstanding shares, 18,397,010,967 shares representing 69.05% are owned by Filipino citizens while 8,244,635,934 shares representing 30.95% are owned by foreign nationals,” it said.

Ayala Land Inc. officials declined to comment, while Mabuhay Holdings and PRC executives could not be reached for comment.

Minority shareholders of PRC, meanwhile, released a statement yesterday asking the SEC to look into the PSE report.

Alfonso Javier D. Reyes, Ayala Corp. secretary, confirmed that the Ayala family’s holding company had reached the 40% foreign ownership limit.

“There’s no breach but it’s true that we are at the foreign ownership limit. What happens is if there is more foreign demand for shares, they’re queued up,” he said.

He added that Ayala Corp. would be getting shareholders approval for a stock rights offering of preferred shares.

The offer, which would allow shareholders to buy one share for every existing one they hold, will be presented to stockholders on August 28 and would likely be started by October.

The PSE recently came out with a memorandum that requires listed firms with unclassified shares and foreign ownership limits to update their securities information on a daily basis.

Starting July 2, listed firms have been required to give daily reports through the PSE’s online disclosure system.

Ayalas firm up deal with Saudi prince (BusinessWorld)

Published in the April 3, 2007 issue of BusinessWorld

Ayalas firm up deal with Saudi prince

BY JENNEE GRACE U. RUBRICO, Sub-Editor

THE AYALA GROUP yesterday firmed up a joint venture with a firm founded by a billionaire Saudi prince for a $153-million luxury hotel complex in the Makati business district.
The venture between Ayala Land, Inc. (ALI) and Dubai-based Kingdom Hotel Investments (KHI), founded and chaired by Saudi Prince Alwaleed bin Talal bin Abdulaziz Alsaud, would be the most expensive hotel project in the country.
A wire report yesterday said the prince – described as on a 10- day Asian tour – was looking at expanding in the region, and that KHI had a $1-billion war chest for investments. Quoting an interview in The Financial Times, AFP said the prince had described the United States as still obsessed with 9/11 and would not likely allow Arab investments in sensitive areas.
The prince, whose Kingdom Holdings owns big stakes in US companies including Citigroup and News Corp., said he personally has had no problem investing
and operating in the US. But he said KHI, whose portfolio is currently focused on the Middle East and Africa, is looking to expand its Asian holdings.
“There is a double impact in Asia,” the prince told the newspaper. “Countries are growing fast on their own and also benefiting from the spillover effects of China’s
growth.
“KHI has a war chest of US$1 billion and is actively looking to expand in China, South Korea and the Philippines. Asia has huge potential,” he was quoted as saying.
Prince Alwaleed flew in yesterday for what ALI officials said would be signing ceremony for the Makati project, an economic briefing and dinner with President Gloria Macapagal Arroyo.
Flight delays, however, meant a scheduled 5:30 arrival and subsequent briefing by Cabinet officials was not met. Malacañang officials confirmed that dinner
with the prince would push through, but added that a news blackout was imposed on the event for security reasons.
ALI President Jaime I. Ayala told reporters yesterday the planned complex, which would have a 300-room Fairmont Hotel, a 30-suite Raffles hotel and 189 Raffles-branded residences, would rise on a 7,377 square meter lot along Makati Avenue and Pasay Road which is currently being used by Anson’s department
store, Park Square 2, and a public  transport terminal.
The project, Mr. Ayala said, was an offshoot of President Gloria Macapagal-Arroyo’s visit to Saudi Arabia last year. During the visit, Mrs. Arroyo and the King of Saudia Arabia discussed investments in the Philippines and the King had asked Prince Alwaleed to look at opportunities, Mr. Ayala said.
The prince talked with the Trade department and consequently contacted Ayala Land, he added.
Mr. Ayala said that Ayala Land was hoping to enter into other partnerships with KHI, but added that his firm does not have exclusive rights to the Dubai firm’s investments in the country.
“But certainly, we’d like to talk to them about other opportunities in other areas,” he said. “By putting something that high end [in the area], the whole
site will be upgraded,” Mr. Ayala said.
He did not detail what the hotels’ rates would be.
Mr. Ayala admitted the complex will have to compete with existing hotels in Makati, including ALI’s own Intercontinental Hotel which was just renovated. But he also said that the price points will likely be different, and added that the other hotels in the area are “old,” the most recent being Makati Shangri-La Hotel
which was built in 1993.
He also claimed that Makati is also experiencing a shortage in hotels, as local and foreign investors, as well as tourists are flocking to the city.
Data from the Tourism department show that as of January, hotels in Makati posted an occupancy rate of 78.45%, above the Metro Manila average of 75.74%.
Mr. Ayala said that the new complex will cater to both the convention and banquets and the leisure markets. The Fairmont Hotel, he said, will have ballrooms, while the Raffles Suites will be built for privacy and exclusivity. Both hotels, Ayala Land said, will also have spas.
The new hotel complex will be placed under KHI-ALI Manila Inc., the joint venture firm that will own the property on which the hotels will stand, and KHIManila
Properties, Inc., the operating company. ALI donated the land, while KHI will shoulder the hotel’s development and operations.
The new complex will form part of ALI’s portfolio of hotels and serviced residences. Besides the Intercon, ALI also owns Cebu Mariott and, until recently, the former Oakwood Premier, which was sold to the Ascott group.
KHI is an international hotel and resort acquisition company that develops first class and luxury hotels in the Middle East and Europe. It has partnerships with
Four Seasons, Movenpick and Fairmont Raffles hotels.
The wire agency AFP, meanwhile reported that Prince Alwaleed had told The Financial Times “The US is still obsessed by 9/11 and sensitivities over security.”
He was quoted as saying the US is unlikely to allow Arab investment into airports, ports and other sensitive areas for several years as a result.
US security concerns over Arab investment gained prominence last year when DP World, controlled by the Dubai government, acquired US operations through a US$6.9-billion acquisition of Peninsular and Oriental, a deal making it one of the world’s largest port operators.
Following fierce congressional opposition to the US part of the deal on security grounds, and despite the backing of President George W. Bush, the Dubai government decided to relinquish DP World’s operations at six US ports.
Mr. Alwaleed told The Financial Times the Dubai ports issue “was unique and that matter is behind us.” — with a report from AFP

Call centers seen leaving Makati (BusinessWorld)

Published in the January 17, 2007 issue of BusinessWorld

By JENNEE GRACE U. RUBRICO, Sub-Editor

Call centers seen leaving Makati

Contact centers could begin moving out of the Makati Central Business District in two to five years as rents continue to escalate and qualified labor increasingly becomes a constraint, experts said.
Property analysts polled by BusinessWorld said cost-sensitive call centers may start their exodus when office rents go beyond a historical high of P1,000 per square meter.
But Makati’s loss will be other cities’ gain, as these call centers will likely relocate in alternative business districts, they added.
"A lot of call centers and support services type of operations ... got favorable rents [when they came in after the Asian financial crisis] and then suddenly, rates will be doubling. These guys are natural candidates [for leaving]," said David Young, managing director of Colliers International Philippines.
"They don’t need to be in the best quality buildings in Makati, they can happily function on any location in Manila as long as infrastructure services get to them."
Mr. Young said he sees these firms leaving the central business district in two to five years because lease contracts usually run this long.
In its third quarter 2006 market report, Colliers said premium grade space in the Makati CBD hit P798 per square meter per month, approximating early 1996 levels. It also predicted that by this year, office rental in the business district will breach P1,000 per square meter per month, the going rate just before the 1997 Asian financial crisis.
Four years ago, rental rates were at P350 per square meter per month, Asian Institute of Management Professor Danilo A. Antonio told BusinessWorld.
Call centers, the property analysts said, could transfer to cheaper business districts like Eastwood in Quezon City, Fort Bonifacio in Taguig, Filinvest in Muntinlipa or the periphery of Makati if their only concern is high rent.
If the concerns are expanded to include labor shortage, they will be looking at other areas in the region, said Paul Ryan L. Isip, associate director for global corporate services of CBRE Philippines
"This [labor] is a constraint," he added.
Even if costs escalate, however, a few call centers will remain in the central business district, experts said.
"Call centers might just stay [in Makati] since moving costs can be too high," Mr. Antonio said.
Mr. Isip said some outsourcing companies will stay "as not all outsourcing companies have the same cost structure."
But Makati, said Business Process Association of the Philippines president Danilo Reyes, is still the place to be for contact centers that want to establish their presence.
"Some will stay because they need to have presence while others will go once their rents double up," he said.
Colliers Research director Richard Raymundo also said that while P1,000 per square meter per month is a historical high in peso terms, this does not approximate 1997 rental rates in dollar terms.
"The dollar is now around P50. In 1997, it was at around P26. You will not go back to those rates. So rental rates are still much cheaper now if you consider it in dollars," he said.
Analysts said the vacancies resulting from the transfer of call centers will be taken up by multinational firms that want to either establish a presence in the country or expand current operations.
"At the same time that [call centers] are coming under cost pressure, we are seeing a general increase in demand for space other segments of the office market. Commercial services and the banking industry are doing well, and companies to support these industries are doing well," Mr. Young said.
He also noted that multinationals are "looking to put back office functions" in the country.
"Technically, this is business process outsourcing. We’re seeing that demand from multinationals," he added.
Mr. Young also said demand for space not necessarily in the Makati central business district is also coming from call centers abroad.
"It’s not just jobs in America, Canada, Europe. There is incredible interest in India. Traditionally, Bangalore has been the hub for call center business. Bangalore is now coming under cost pressure, they’re coming under labor constraints so we’re seeing companies operating in India now looking to the Philippines to secure their needs," he said.

Maynilad pays P2.4B to creditors, signals Lopez group exit (BusinessWorld)

Published in the July 29, 2005 issue of BusinessWorld

Corporate World

BY JENNEE GRACE U. RUBRICO, Senior Reporter

 

Maynilad Water Services, Inc. has paid P2.41 billion to creditors last week in line with its court-approved rehabilitation plan, a move that signals the start of the exit of the Lopezes from the water firm. Helena Calo, Maynilad external counsel, said the water utility gave creditors an up-front payment of $30.6 million for the dollar component and P100 million for the peso component of the loans.
The company also paid interest amounting to $7.19 million for the dollar component and P202.98 million for the peso loans, she said. "In compliance with the debt and capital restructuring agreement approved by the court and confirmed by all creditors to be effective on July 20, 2005, Maynilad remitted payments Total remittance amounted to P2.41 billion."
She said all the restructured debts will be paid in full by 2013.
Sources said Maynilad paid the P2.41 billion from internal funds.
The water concessionaire implemented a tariff increase in January. This, sources said, allowed the firm to generate P1 billion in profits in the first half.
Lopez-led Benpres Holdings Corp. is yet to come out with official figures for the first half.
Maynilad’s rehabilitation plan provides the company would pay debts up-front to foreign and local banks totaling P10 billion.
Based on the repayment scheme, the next payment of $26 million will be made next year. The remainder of the debts will be paid over seven to eight years.
Besides being required to repay creditors, Maynilad is also required to pay concession fees to the Metropolitan Waterworks and Sewerage System (MWSS), amounting to P8 billion. Last January, MWSS drew on a $120-million performance bond, reducing Maynilad’s debts to the water regulator.
Also provided for in the rehabilitation plan is the capital restructuring of the utility.
Benpres owns 60% of Maynilad, while French partner, Ondeo, owns 40%.
Benpres representatives in the company are required to resign "in order to enable [the water firm] to promptly carry out the capital restructuring."
Benpres will also need to surrender to MWSS or its designated assignee the irrevocable proxy to vote all the shares of stock of Benpres in the firm.
Further, Benpres is also required to surrender its shares in Maynilad to the rehabilitation receiver for "safekeeping" until the shares need to be surrendered to Maynilad.
The MWSS will take over May-nilad from Benpres on an interim basis. MWSS would manage the west zone concessionaire until it finds a private investor to take the place of Benpres.
Two consortia are interested in Maynilad -- one led by DMCI Holdings, Inc. and includes Australia’s Macquarie and Japan’s Marubeni as well as two other unidentified foreign financial institutions. Another consortium is led by Manila Water Co., Inc. and reportedly includes Ayala Corp., and ING, among others.
Meanwhile, another Lopez unit ABS-CBN Broadcasting Corp. said it had not received any offer from Philippine Long Distance Telephone Co. or any other party with regards to buying a stake in the media firm or any of its units.
Meanwhile, another Lopez unit ABS-CBN Broadcasting Corp. said it had not received any offer from Philippine Long Distance Telephone Co. or any other party with regards to buying a stake in the media firm or any of its units.