Wellex Industries, Incorporated
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. To finance its operating expenses, the Parent Company obtains advances from related parties.
The Parent Company has put on hold its plans to acquire a mining company with an existing MPSA with the Mines and Geosciences Bureau (MGB). This is due to the stringent requirements that the Department of Environment and Natural Resources (DENR) had placed on several dormant mining companies and the subsequent business slowdown in the industry as a result thereof.
The PCIC subsidiaries’ investment properties were used as collateral to secure loans obtained by the Group, 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 Group 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 (RTC) 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 should 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.
On December 17, 2012, the Petitioners filed a revised Plan (which supersedes the first Plan) before the Court. Incorporated in the revised Plan is the Memorandum of Agreement (MOA) entered into by the Parent Company and other related parties with Avida Land Corp. (ALC) 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 an outstanding balance of ₱4.01 billion which includes interest, litigation expense, penalties, attorney’s fee and other charges as at December 31, 2013. 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 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, was 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 RTC, 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.
On October 20, 2014, the RTC issued an order which disapproved the enhanced rehabilitation plan of Petitioners and converted the rehabilitation case into liquidation. The RTC also issued an order which declared the Petitioners insolvent, ordered the liquidation of the assets of the Petitioners, and directed the sheriff to immediately take possession and safely keep all real and personal properties until the appointment of liquidator.
In 2014 to 2016, several motions for reconsiderations and petitions for review were filed before Court of Appeals (CA) and Supreme Court (SC).
On November 4, 2016, the Petitioner’s received the resolution dated September 14, 2016 of the
Supreme Court, denying the petition for review. On November 21, 2016, the Petitioner filed a Motion for Reconsideration of the said resolution. On February 28, 2017, upon Petition of PNB, the RTC issued an order allowing the suspension of action in the proposed liquidation plan until after the comments of the creditors with regard to the amount of remaining obligation after foreclosure are taken into consideration in the liquidation plan. On March 1, 2017, the RTC issued an order granting PNB to continue with the foreclosure proceedings. On October 4, 2017, the SC resolves to deny the Motion for Reconsideration with finality.
On January 24, 2018, the RTC rendered a decision ordering NLC and some of the stockholders jointly and solidarily liable to pay PNB amounting to ₱593 million with interest of 12% per annum from date of default, 24% penalty per annum and ₱3 million attorney’s fees, less the proceeds of the auction sale of ₱119 million. On March 20, 2018 in order to terminate the proceedings and to finalize the settlement of all obligations of the Group to PNB, including, but not limited to the judgment of RTC, the Group entered into a Settlement Agreement with PNB to pay ₱950 million (the ‘Settlement Amount’) payable in two (2) tranche (₱850 million upon execution of the Settlement Agreement and ₱100 million thirty (30) days after). Once PNB receive the Settlement Amount, it shall release the titles and issue the corresponding Cancellation of Mortgage of its lien over Davao and Valenzuela properties of the Group. Also, PNB shall sell the Quirino, Manila properties to NLC for a consideration of ₱170 million which is to be taken from the Settlement Amount. Further, after compliance of all obligations in the Settlement Agreement, the Group and NLC are hereby mutually, irrevocably, freely and voluntarily release and forever discharge one another, including their principals, affiliates, subsidiaries, owners, directors, officers, managers, successors-
On the same date, the Group issued a check payable to PNB amounting to ₱850 million. On April 11, 2018, the Group paid the balance of ₱100 million to complete its obligations under the Settlement Agreement.
In view of the Settlement Agreement between the parties, on May 31, 2018, Valenzuela RTC has rendered a decision that the corporate rehabilitation case is now closed and terminated.
Based on current operation, the Parent Company’s cash requirements can be generated internally
from rental income from the remaining lease contracts of its subsidiaries. However, should there be
substantial deviation from the Parent Company’s commercial activities there might be a need to
raise funds by way of advances from shareholders or officers and affiliates. The Group has substantial amount of trade receivables and receivables from related parties which are realizable upon demand. The management believes that resources are sufficient for projected plans for the next twelve (12) months.
The Group will pursue their Agreement with ALC for the development of the real estate. The project will be undertaken in a joint venture with Philippine Estate Corporation (PHES), an affiliate, to convert industrial real estate into commercial and residential zones to increase its value.
Furthermore, the Group will explore new business opportunities in the development of industrial estates, and to this end, ocular inspections for suitable raw land for development into industrial estates are being carried out in Cavite, Laguna, Batangas and Bulacan. Discussions have been carried out with local government city planning officials in order to determine which sires are candidates for long-
Manpower will be outsourced when needed and when the operation commence. A capital-
Consequently, the consolidated financial statements have been prepared assuming that the Group will continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of the recorded assets or the recognition and classification of liabilities that might result from the outcome of this uncertainty.