September 26, 2006

 

Philippines' debt-laden Vitarich gets two takeover offers

 

 

Vitarich Corp Tuesday (Sep 26) said it has received offers from two companies to take control of and provide financial support to the debt-laden Philippine poultry and feed concern.

 

One of the companies, a local feed milling concern, offered to acquire debt notes worth PHP3.2 billion (US$63 million) in exchange for a controlling equity stake, Vitarich said in a disclosure to the stock exchange.

 

The other company, a foreign feed miller, has proposed a management takeover of Vitarich.

 

Vitarich declined to identify the interested parties, but said both companies are financially stable and are able to help the company conclude its 15-year debt restructuring plan ahead of schedule.

 

Vitarich said it must first reach an agreement on the company's valuation before opening talks with a potential suitor.

 

Last week, a provincial court allowed Vitarich to suspend payments on its debt pending a ruling on the company's petition of rehabilitation.

 

The Regional Trial Court of Bulacan's Sep 19 order "stays the enforcement of all claims" against Vitarich as well as guarantors of its loans.

 

The court has set the initial hearing on the rehabilitation petition for Nov 8.

 

Vitarich reported at the end of June that its total liabilities were PHP3.22 billion (US$63 million), with PHP2.36 billion (US$46 million) in interest-bearing loans owed to several banks.

 

In its court petition, Vitarich proposes two strategies to nurse itself back to financial health. One will involve the restructuring of its debts in favor of several banks, while the other involves the conversion of the debts into receiver's capital notes.

 

Vitarich's plans also include reorganizing its operations and product lines, the entry of a potential suitor and an overhaul of the company's distribution system.

 

Vitarich's financial troubles stemmed from its mid-1990 expansion in anticipation of a boom in the poultry and swine industry. It borrowed to fund its growth programme.

 

But its competitors expanded as well, leading to oversupply, which depressed prices and hurt profitability. Compounding Vitarich's woes, interest rates rose following the 1997-1998 Asian financial crisis.

 

Between July 1998 and March this year, Vitarich entered into several loan restructuring agreements with banks.

 

In the first half of this year, Vitarich narrowed losses to PHP90.4 million (US$1.8 million) from PHP104.6 million (US$2 million) for the year-earlier period, mainly due to lower expenses.