Wednesday, August 24, 2005

Farewell to YGC

It is with deep regret that we are informing the readership that the good faith negotiations that PPI requested a few weeks back (with much fanfare on their part) has broken down. The breakdown is due to PPI's failure to follow up on their representation that they would advance an offer which improved upon their discredited original rehabilitation ploy.

Therefore, the PEP Coalition negotiation team has withdrawn as of today, 24 August 2005, from the negotiations following the PPI's failure to deliver on its representations.

We are filled with a terrible sense of unease as well as deep disappointment as we are witnessing the shattering of a pillar of Philippine society. For reasons known only to themselves, YGC has decided on a walk-away strategy and risk the exposure of their entire franchise of trust and fiduciary businesses to troubling questions and doubts regarding the strength, quality, and integrity of contractual obligations they make with their customers.

It is back to the battle lines.

Saturday, August 06, 2005

Suggested Guidelines for Evaluating a Deal

Furnished below is a contribution of one of our readers which attempts to put forward a clear set of guidelines that all planholders (ie. non-educational plans included -- see pt. 1) can use for evaluating the deal that PPI and the Coalition are attempting to hammer out.

All eyes are on YGC as they asked for the negotiated settlement. The pressure is on for YGC to establish an honorable deal for all of their customers if they wish to regain their trust and win back their business.

Plan-holder Manifesto-

On 22 July 2005, it was reported on all the major broadsheets that PPI and its plan-holders will attempt to reach a settlement and that the plan holders will be paid.

So the question is: Can we now relax our guard? Do we go back to the peaceful pre-default days of just 6 months ago – BUSINESS AS USUAL?

Perhaps, this is possible but we should take refuge in the old saying: “Hope for the Best, but Plan for the Worst.”

We are told that PPI and the PEP Coalition negotiating team have agreed to negotiate to arrive at a win-win settlement and payment plan. Thus far the coverage of such a settlement appears to be exclusively applicable only to the traditional or open-ended educational plans, for both the availing and non-availing plans.

In the event that the negotiation is successful and a plan is structured, we must assume out of conservatism, that the plan needs to be presented and approved by all plan-holders, all 440,000 or so plans currently booked by PPI and the company formerly known as Lifetime Plans. This is particularly the case if the plan will involve some manner of novation of the terms and conditions of any of the plans outstanding.

Clearly, this is an ambitious hope for the best.

In the spirit of good faith negotiations, let us assume that YGC is still interested in keeping PPI as a going concern and more importantly determined to regain the trust that was lost. On the plan-holders’ part, we believe we should set-out some basic requirements in a framework to regain lost or damaged trust.

The purpose of this Manifesto (whose synonyms by the way of trivia are: policy, program, and proposal), is to set out two fundamental expectations we shall be looking for in any proposed settlement plan.

1. Equal treatment for all Plan-holders, i.e. traditional, fixed, interment, etc.

For instance, if non-availing traditional plan-holders (i.e., those that are not yet entitled to file claims) are allowed to receive their entitlement based on current value, then the same principle should apply to other non-availing fixed plans et alii.

2. Concrete steps to strengthen the financial, operational condition and ownership structure of the surviving pre-need company in order to rebuilt lost or eroded trust between the company and its plan-holders.

Some of the basic concrete action steps we are proposing are:

i. Single Entity - Consolidate the assets and liabilities of PPI and Lifetime back into a single legal entity under the same management and ownership structure.

ii. Full Accounting and Disclosure – The company PPI or preferably an independent accounting firm must audit, restate and reaffirm its current financial condition. Particularly, we need to determine the market value and liquidity profile of the various PPI trust funds and we need to know the nominal and ARL values of PPI’s outstanding plans.

iii. Strong Shareholder Support and Commitment – The shareholding of the surviving pre-need company needs to have clear and direct links to financially strong operating companies or links to reputable, high net-worth individuals. In other words, we need to reverse engineer the shareholding away from the two tier holding company structure, companies of limited financial strength and operational track record.

Alternatively, PPI can obtain strong corporate or financial guarantees from YGC companies or perhaps a continuing personal guarantee from the beneficial shareholder himself.

iv. Independent and Professional Trust Management – RCBC as trust manager for PPI funds is too close for comfort. In order to avoid acrimonious confrontations regarding the origin and rationale of the NAPOCOR bonds in the investment portfolio, we suggest that RCBC buy back these bonds from its trust unit and the proceeds can be reinvested by PPI with third party, independent and professional trust units of financial institutions not affiliated with YGC.

The fundamental question here is: Are we asking for too much?

PERHAPS, but clearly, PPI and YGC is likewise asking a lot from its plan-holders to return to a normal “business as usual’ stance.

What is undeniable and what is beyond debate is that Trust needs to be reestablished, and steps need to be taken to earn back the Trust of the plan-holders and more importantly the general investing public.

Without such a program to rebuild and regain Trust, PPI is as good as Dead Man Walking, an entity with a terminal illness, wasting away whatever assets and goodwill left in this once proud and respected body.