A just and reasonable debt compromise

About 28 years ago, a fast-growing, high-flying conglomerate known as the CDCP (Construction Development Corporation of the Philippines) had it so good that the mere word of its executives and its owners was considered in business circles here and abroad to be etched in granite, good as gold, or unquestionably bankable.

CDCP then was one of the corporate miracles or overnight business sensations of the Marcos era. It was—at least on the surface—owned and headed by Rodolfo Cuenca, a known Marcos crony. At the head of the management team was the late Oscar de Venecia, elder brother of House Speaker Jose de Venecia.

In other words, during the martial law phase of the Marcos era, CDCP was riding high. But it was no secret that during that period, the business empires that endured for many decades (branded the “old oligarchies”) were being dismantled by the Marcos government. New ones—the so-called crony companies—were encouraged to rise fast and furiously by Marcos himself. And so the new overlords of the local business scene emerged.

Rodolfo Cuenca of CDCP was definitely one of the more prominent, but often controversial, figures to rise to national prominence as among the Top Five of the Marcos crony game. Cuenca’s intimate friendship with Marcos enabled him to bag the juiciest infrastructure projects the government could award, among them the north and south expressways projects and the bridge of love connecting Leyte and Samar (San Juanico). During his heyday, Cuenca practically enjoyed the right of first refusal on all government construction projects.

Business was so good CDCP metamorphosed from a mere road-paver to a full-scale construction giant, with a diversified network of mining, port management and manufacturing subsidiaries.

Viewed against this backdrop, we can easily understand how Marubeni Corp. came to lend CDCP so much in operating capital during the martial law years. At that time there seemed to be absolutely no doubt that CDCP would honor huge advances and pay it back with interest, given the string of successes CDCP was leaving in its wake.

Marubeni unhesitatingly shelled out millions in dollars every time CDCP needed funding. By the time it started to dun CDCP 26 years ago, it had placed its total exposure at P2.6 billion.

Twenty-six years ago the Philippine economy was in trouble and the Marcos regime was beginning to wobble. That was when Marubeni decided to move in on CDCP. With Marcos very ill and in and out of sedation, Cuenca’s CDCP was on its own to dodge, elude and evade responsibility for the debt.

Four or five years later, the great Marcos bubble suddenly burst, and the political picture changed overnight. The Edsa Revolution in 1986 and the eventual taking over of the Aquino administration dealt a crippling blow on CDCP.

Aquino then launched the great hunt for Marcos’s ill-gotten wealth and through the PCGG went on a sequestration binge, which did not spare Cuenca or the CDCP. The government, suspecting that its real owner was Marcos himself and that Cuenca was a mere dummy, took over all CDCP assets and renamed it the Philippine National Construction Corp. (PNCC) pending the outcome of all lawsuits pertaining to the sequestered assets.

But as far as Marubeni was concerned, a debt is a debt and its loans and advances to CDCP must be honored and paid back by the government-operated PNCC. And so it persisted with its collection suit, which didn’t make much progress in the lower courts.

PNCC, for its part, continued to elude, evade and avoid responsibility for the huge debt by citing and invoking all sorts of imaginable excuses and technicalities. The collection suit had dragged on for almost 20 years before Marubeni, in 2000, finally decided to give it all up in exasperation.

The Japanese giant, which has done business in this country for almost a century, assigned that debt to Radstock Securities Inc. for the equivalent of only P100 million, which is probably equivalent to the legal fees it paid in sustaining its collection suit.

Radstock Securities is a special-purpose vehicle owned by the Fiduciary Asean Recovery Fund based in Hong Kong. It is represented locally by former Agriculture Secretary Carlos “Sonny” G. Dominguez. Radstock has been described as a special vehicle controlled by a fund with a good track record in the acquisition of high-risk Asian debt.

The PNCC never questioned the existence of the debt, but in the latter part of the 26-year period raised the issue that it has been so long the debt had prescribed and died out. The Court of Appeals threw out this contention out and ordered the continuation of trial. The PNCC raised the same point before the Supreme Court, which told the CA to continue hearing the case.

Last year, the PNCC finally relented and forged a compromise agreement with Radstock. PNCC had its back to the wall, so rather than be forced to pay a total of P17 billion, the aggregate of principal, cost of money and penalties incurred during the 25 years that the debt remained unpaid, it agreed to pay only P6.2 billion, or the equivalent of 36 cents on the dollar, which was fine with Radstock because this is the going rate in similar cases under the government’s special-assets vehicle program.

This deal, which was approved by the CA, was once more questioned by all sorts of characters who have been crawling out of the woodwork when Radstock seemed on the verge of getting a favorable verdict. The Supreme Court, as it turned out, threw out all objections to the deal and remanded the case to the CA where it belongs.

But even if the compromise agreement is carried out, Radstock has yet to untangle other meshes in which the PNCC is trapped. Much of the payments to be made by PNCC to Radstock are encumbered or otherwise compromised because of competing claims.

For instance, the 12.9-hectare property at the Bay Reclamation Area’s financial center is also being claimed as its own by the GSIS. Part of the payment mode agreed to by PNCC is that Radstock would have a share in the North Luzon Expressway collections over a 27-year period. This is another problematic PNCC concession. What happens if PNCC doesn’t get its franchise renewal? This means Radstock has to work its ass off lobbying for a renewal. Only a renewal will ensure that Radstock would get paid in small installments for nearly three decades amounting to only P1.2 billion. 

E-mail: Omerta_bdc@yahoo.com

Contrary to the claims of the perennial doomsayers that the Philippine economy is down in the dumps, there’s actually enough good news in the economic front to merit a positive outlook.

Dear fellow sheep,

A few Sundays ago, our shepherd, Archbishop Gaudencio Cardinal Rosales, wrote an election-related pastoral letter addressed to us, his flock in the archdiocese of Manila.

I was born in Makati, but had lived most of my life in Parañaque. In the last four years, however, I have been a resident of Makati—just in the fringes of the central business district—and I find this very convenient.

About 28 years ago, a fast-growing, high-flying conglomerate known as the CDCP (Construction Development Corporation of the Philippines) had it so good that the mere word of its executives and its owners was considered in business circles here and abroad to be etched in granite, good as gold, or unquestionably bankable.

It appears that GO’s greatest enemy is within its own party.

My first full-length movie was rejected by the Sundance Film Festival. Granted it was only a thesis project to complete my Master in Fine Arts at Columbia University. But that doesn’t mean I wasn’t devastated. I still keep the rejection letter sent by the festival director, Geoff Gilmore, to remind myself I’ve got a long way to go.