Creditors banks are set to declare Indian-owned Global International Holdings Ltd. (GIHL) in default for failure to renew a P500 million standby letter of credit as part of the agreement when it purchased the former National Steel Corp. (NSC) for P13.25 billion.
Trade and Industry Secretary Peter B. Favila was informed by the Philippine National Bank (PNB) of the banks move. PNB is the biggest creditor of NSC with exposure of
P5.6 billion in the steel plant.
"This means that the banks have the facility secured by a standby letter of credit and if this is not renewed then the banks will end up the proverbial holding the bag," Favila said.
This means that creditor banks may have the power to takeover the Iligan-based steel plant that is being operated by GIHL’s local unit Global Steelworks International Inc. (GSII). GIHL is part of the Ispat Group of India.
It could be recalled that GIHL signed a purchase agreement with the creditor banks of NSC the final agreement of which was concluded with the signing of three documents that effected the sale of the country’s biggest steel plant to the Indian-owned steel conglomerate.
After the signing of an Asset Purchase Agreement, an Omnibus Agreement and a Sharing Agreement were finally signed alongside with GIHL’s handing over to the consortium of a down payment amounting to
P1 billion.
The Omnibus Agreement is a detailed document that contains the form of the notes that will be issued by GIHL to the secured creditors as evidence of the remaining
P12.25 billion indebtedness that it commits to pay on installment basis for eight years.
The Agreement also stipulates the appointment of PNB Trust Banking Group as NSC’s facility agent and the collateral trustee for the sale of NSC aside from documenting the mortgage trust indenture of the Iligan-based steel plant.
Apparently, the Indian-owned company failed to renew the
P500 million standby letter of credits to the creditor banks.
Pending to do so would mean the banks regaining control over NSC. (BCM)
GIHL is not just having problems with the creditor banks but also with the local government of Iligan for notbeing the current real estate taxes amounting to about
P80 million to P90 million to the city government.
Iligan City mayor Lawrence Cruz was quoted as saying they have already sent reminders to GSII for at least five times but to no avail.
Cruz said that if GSII cannot pay up in the next two months, the city government will be forced to collect the
P1 billion, representing debts of NSC’s former owners the city government had agreed to waive to attract more investors and speed up the steel plant’s reopening.
GSII, according to Cruz, was only able to pay transfer taxes amounting to
P1 million but not the other tax obligations.
It was also alleged that GSII has delayed payments to salaries of about 1,200 workers.
NSC was closed in 1999 following a financial crisis displacing thousands of workers in Iligan and nearby provinces.
Its reopening last year under the Ispat Group of India ushered in an era of hopes for the country’s biggest steel mill with the new Indian owners laying down aggressive expansion programs including backward integration of the hot and cold cold rolled and billets operations.(BCM)
