Wellex Industries, Incorporated (the “Parent Company”) was incorporated in the Philippines on October 19, 1956 primarily to engage in the business of mining and exploration and was formerly known as Republic Resources and Development Corporation (REDECO). The Company’s change in name was approved by the Securities and Exchange Commission (SEC) on September 18, 1997.
On February 11, 1995, the SEC approved the Parent Company’s amendment in its Articles of Incorporation. The Parent Company changed its primary purpose from mining activities to development operation of all types of business enterprises, including by not limited to enterprises engaged in the business of real estate development. Mining, however, continues to be one the Company’s secondary purposes.
The Parent Company’s corporate life officially ended on October 19, 2006. On January 19, 2006, the Company’s Board of Directors (BOD) and stockholders approved the amendment of the Company’s Articles of Incorporation extending the corporate life for another 50 years up to October 19, 2056. The Parent Company’s Amended Articles of Incorporation was approved by the SEC on July 20, 2007.
On November 20, 2008, the BOD and stockholders approved the amendment on its Articles of Incorporation amending the Parent Company’s changed in its primary purpose. The Parent Company’s primary purpose was changed to employment of capital for the purpose of assisting mining enterprises. The Parent Company’s secondary purpose, however, remains for operation of all types of business enterprises, such as property holding and development, management, manufacturing, investments and other business. The amendment was approved by the SEC on April 3, 2009.
The Parent Company’s shares are listed and traded in the Philippine Stock Exchange (PSE).
The Parent Company has two subsidiaries, Plastic City Industrial Corporation (PCIC) and Philfoods Asia, Inc. (collectively referred to herein as the “Group”).
The registered office address of the Parent Company is located at 35th Flr. One Corporate Centre, Doña Julia Vargas cor. Meralco Aves., Ortigas Center, Pasig City.
Status of Operations and Management Plans
In prior years, the Parent Company’s business of mining and oil exploration became secondary to real estate and energy development. On January 28, 2008, the BOD approved the amendment of the Parent Company’s primary purpose from a holding company to a company engaged in the business of mining and oil exploration.
The purpose of the amendment of the primary purpose was essentially to enable the
Parent Company to ride the crest of a resurgent mining industry including oil exploration
of the country’s offshore oil fields. The Parent Company’s strategy is to identify
mining properties with proven mineral deposits particularly nickel, chromite, gold
and copper covered by Mineral Production Sharing Agreements (MPSAs) and to negotiate
for either a buy-
However, the continuing global financial crises dampened the metal and oil prices that adversely affected the investment environment of mining and oil and mineral exploration industry of the country.
The subsidiaries ceased its manufacturing operations in prior years from 2000 to 2002 due to the Asian crises and stiff business competition, and had leased out its building facilities.
The Group’s investment properties were used as collateral to secure loans obtained by the Group and its related parties, Kenstar Industrial Corp. (KIC) and Plastic City Corp. (PCC) in prior years. The loan was obtained from Banco de Oro (BDO) and Philippine National Bank (PNB) through a joint Credit Agreement with the related parties. Due to default to settle the outstanding obligations by the Company and its related parties, on October 28, 2010, PCIC subsidiaries, Inland Container Corp. (ICC), Pacific Plastic Corp. (PPC), and Kennex Container Corp. (KCC) (the “Petitioners”) filed a petition for corporate rehabilitation (the “Plan”) before the Regional Trial Court of Valenzuela (the “Court”) by authority of Section 1, Rule 4 of Rules and Procedures on Corporate Rehabilitation, in order to revive the Petitioners manufacturing operations and bring them back to profitability for the benefit of the creditors, employees and stockholders.
The Plan will be implemented over a span of five (5) years, with the Group to expect gross income projection of ₱4.214 billion from 2011 to 2015, assuming the Plan was immediately approved. The Plan entails the following: (a) capital restructuring; (b) debt restructuring; (c) reconditioning of machinery and equipment; (d) implementation of sales plan; and (e) joint venture for the real estate conversion from industrial to commercial and residential.
The Group’s properties were subjected to foreclosure sale on November 5, 2010, but were suspended due to the issuance by the Court of “Stay Order” dated November 2, 2010 which among others, appointment by the Court of a Receiver and setting the initial hearing on the petition on December 14, 2010 whereby all creditors, the Bank and the related party creditors, were allowed to submit their comments on the corporate rehabilitation.
On March 9, 2011, the Receiver filed an initial report on the rehabilitation plan
before the Court. The related party creditors interpose no objection to the Plan.
However, the creditor banks (PNB and BDO) commented on the dismissal of the Plan
due to: (a) failure to comply, in form and substance, with the requirements of Financial
Rehabilitation and Insolvency Act of 2010 (FRIA); (b) non-
On June 7, 2011, PNB filed a motion to dismiss the Plan, however, the court issued on July 27, 2011an order denying the motion to dismiss filed by PNB for being a prohibited pleading.
On August 26, 2011, the Petitioners, filed an opposition to PNB’s motion to dismiss and swore to show clear blue print for the conversion of industrial real estate into commercial or residential zones and projected financial statements showing in details how the projected revenues will be attained under the Plan, within thirty (30) days from August 26, 2011 to September 25, 2011 through a revised Plan.
On August 31, 2011, a motion to dismiss was filed by BDO joining the previous motion to dismiss filed by PNB.
On September 18, 2012, the Court granted the Petitioner’s motion for the time to submit the revised Plan and gave the Petitioners sixty (60) days until November 4, 2012 to submit the revised Plan.
On September 24, 2012, the Petitioners filed a motion for partial reconsideration on the submission of revised Plan with respect to the Petitioners prayer to be allowed to enter into a formal property development agreement with Avida Land Corp. (ALC). On the same date, ICC has fully settled its loan with BDO, including all accrued interest.
On October 25, 2012, PNB filed its opposition on the motion for partial reconsideration. In its opposition, PNB averred that: (a) the revision of the Plan is no longer proper as it was outside the one (1) year period provided under the FRIA and under the Rules of Corporate Rehabilitation; (b) there is no substantial likelihood for the Petitioners to be successfully rehabilitated.
On November 9, 2012, the court granted the Petitioners motion for the partial reconsideration to submit the revised plan and also authorized the Petitioners to enter into a formal property development agreement with ALC for the purpose of coming up with a concrete and complete Plan, provided that the development agreement will form part of the revised Plan.
On December 17, 2012, the Petitioners filed a revised Plan (which supersedes the first Plan) before the Court. Incorporated in the revised Plan as the Memorandum of Agreement (MOA) entered by the Company and other related parties with ALC on the same date, for the development of 21.3 hectares of land located in Valenzuela City into a residential clusters of condominium, townhouses, house and lots. Out of the total 21.3 hectares, 12.8 hectares (representing 60% of the aggregate area) was owned by the Petitioners, and around 8.47 hectares were mortgaged to PNB to secure the loan with balance of ₱4.01 billion (including principal, interest, penalty and other charges) as at December 31, 2013. The loan’s outstanding principal balance is ₱499 million. The fair value of mortgaged properties to PNB amounted to ₱254.09 million as at December 31, 2013 and 2012. The projected future gross cash flows from the implementation of the revised plan amounted to ₱916.4 million over a nineteen (19) year time frame based on agreed sharing scheme.
On January 31, 2013, the Receiver submitted its comment on the revised Plan and requested the Court to order the parties to negotiate and explore realistic and mutually acceptable rehabilitation plan.
On February, 14, 2013, PNB filed a petition to dismiss the Revised Rehabilitation Plan. On February 19, 2013, the Court ordered the Petitioners for a fifteen (15) day period to file its comment on the motion to dismiss which was due on March 27, 2013.
On March 27, 2013, the Petitioners commented on the motion to dismiss by PNB.
On June 28, 2013 and July 18, 2013 the Petitioners and PNB meet to discuss improvement on the rehabilitation plan, before the Court issued its July 9, 2013 Order (received only in the afternoon of July 18, 2013) submitting to resolution the Manifestation of PNB to dismiss. On July 31, 2013, the Petitioners submitted to the rehabilitation receiver the proposed repayment plan.
On September 13, 2013, PNB filed a Motion for Conversion of Proceedings from Rehabilitation to Liquidation of Petitioners. The Petitioners filed its comment and opposition to the said motion on October 3, 2013.
On November 8, 2013, the Petitioners filed a revised rehabilitation proposal.
On January 15, 2014, a conference prior to the resolution of the case was held among the Petitioners, PNB, BDO and the rehabilitation receiver. One of the topics covered, among others, is the presentation of Revised Rehabilitation Proposal letter by Novateknika Land Corp. (NLC) (borrower of PNB of which the properties by Petitioners were used to secure the loan of NLC) to PNB dated December 6, 2013.
In a letter dated February 3, 2014 by the Rehabilitation Receiver to the Court, the receiver mentioned that efforts were exerted to find a mutually acceptable plan of payment, however, the firm stand of PNB to be paid in full amount of ₱4 billion and liquidate the mortgaged properties served as barriers.
The Rehabilitation Receiver also reiterates his recommendations made in the Report dated November 28, 2013.
To date, the Court has not reached a decision on the matters. Accordingly, the eventual outcome of these matters cannot be determined.