October 25, 2012

Vitarich approves increase in capital stock

Shareholders of Vitarich Corp. has authorised a rise in the firm's capital stock to PHP3.5 billion (US$85 million), a decision that will aid the financially troubled poultry and feeds producer to facilitate the entry of a new investor or retire some of its debt.

Vitarich, in a disclosure to the stock exchange, said shareholders approved the issuance of 3.090 billion common shares that may be used in the conversion of debt into equity or sold for cash subject to the terms to be determined by the board. Vitarich plans to issue the new shares to possible "white knight" investors, who may include existing creditors willing to convert their debt into equity.

"As of date, the corporation is still negotiating with them and at present,there is no firm commitment yet from them," Vitarich said.

Vitarich said such an investment, either in the form of cash or equity conversion, would improve the company's operating capital by retiring all or part of existing loans.

In case of a debt-to-equity conversion by creditors, Vitarich said the company would retire its debt so that income from operations could be used for working capital requirements.

The poultry producer in 2006 filed for corporate rehabilitation after experiencing difficulties in paying bank loans and other liabilities.

Vitarich said it suffered liquidity problems because of a glut in the supply of poultry in the market, stiff competition and the removal of quantitative restrictions on the importation of poultry and poultry products.

The demand for poultry and poultry products also declined because of the outbreak of the avian flu.

Vitarich earlier proposed various options, including the sale of non-core assets and conversion of debt into equity, to reduce debt.

Established in 1950 by brothers Feliciano, Lorenzo and Pablo Sarmiento, Vitarich is engaged in the manufacture and distribution of various poultry products such as live and dressed chicken, day-old chicks and animal and aqua feeds.