Wednesday, July 13, 2005

Picking Up the Pieces - Planholders Are All In the Same Boat

Editor's Note:

For the general readership. As we've said on many occassions, this website is meant to engender well-reasoned debate and research. As you've seen in the previous comments, other planholders have asked how they should think about their situation relative to the trad planholders. The latest series of posts are well researched pieces as the editors are not given to frivolous and irresponsible analysis nor speculation.

Divergent views have never been feared by this weblog. However, it is our prerogative to delete comments that do not contain any hint at all of diligent research. We need to move on beyond emotional tirades and focus on cold and hard facts in order to arrive at the concrete set of actions.

************************************************************************************

Other issues for other planholders to consider:

a) While the idea of putting up an escrow for planholders that have premium payments was emotionally appealing, it may likewise be nonworkable. This is due to the simple fact that we once again have to deal with contracts. In the planholders' existing contracts with PPI, there is no mention of conditions when escrow accounts can be activated. Given that fact, it is unlikely that PPI will accede to operations and initiatives that fall outside of the contract.

b) Let's assume that the trad planholders are paid off in full this year by PPI to shut down this debate on default. That is merely postponing the problem for next year because PPI will yet again have to pay out in full. If they continue to adhere to good business practice, they will preserve their credit standing since this is what PPI needs to continue to convince people to continue buying products for them.

Think hard about this one...who will buy insurance or insurance-like products from a firm that is defaulting? That will mean PPI will continue to pay off all current and maturing obligations IN FULL. In other words, the trad holders will still end up getting their full benefits.

So let us turn the problem on its head. If the trad holders keep their composure and continue to demand full payment, they will be eventually kept whole. It is the other planholders who now have to face the uncertainty of what PPI will have to resort to in order to stave off perennial default situations.

So again, we pose the question. Are not all planholders in the same boat? For the lawyers and finance people in the readership, the situation is totally binary. Do you believe that the planholders hold on to different classes of claims versus PPI or is it just one class?

From the previous posts, it is clear that we believe that it is only one class of claims.

We welcome any logical arguments to the contrary.

96 Comments:

At Thursday, July 14, 2005 5:54:00 PM, Anonymous vicente said...

The analogy that planholders are all in the same boat seems apt but I believe we must also be aware of one other dimension. And that is: time. Or in the image of the analogy: when do the passengers get off the boat? Not all at once, unfortunately.

As I posted before, the non-availing planholders, like it or not, will have to wait their turn. The ones availing now or in the near future will be those to be served first. Or "getting off the boat" first. The non-availers will have to wait at the back till it's their turn.

If non-availers want "to get off the boat" now, then they will have to settle for the present value of whatever they would be getting in the future. The problem, however, is how much is that present value? How does one compute the present value of an unknown amount?

 
At Thursday, July 14, 2005 5:58:00 PM, Anonymous Anonymous said...

IT SEEMS THAT THE NEWS ON THE RECENTLY FAILED COUP HAS OVERTAKEN THE PLIGHT OF THE PACIFIC PLAN HOLDERS. KNOWING THE SHORT TERM MEMORIES OF MOST PINOYS, I BELIEVE THAT THE YUCHENGCOS HAS A LOT OF CHANCE IN WINNING THIS WAR.

AT MY END, I'M STILL MAKING LEAFLETS/POSTERS DENOUNCING THE YUCHENGCOS FOR THEIR FRAUD IN PPI. INFORMING THE PUBLIC THAT YUCHENGCOS CAN NEVER BE TRUSTED. BOYCOTT THE YUCHENGCO GROUP OF COMPANIES. DON'T PATRONIZE THEIR PRODUCTS AND SERVICES. AJA! AJA! FIGHT!!

1) MALAYAN INSURANCE COMPANY, INC.
2) MALAYAN REINSURANCE CORP.
3) MALAYAN INTERNATIONAL INSURANCE CORP.LTD
4) THE FIRST NATIONWIDE ASSURANCE CORP.
5) MALAYAN INSURANCE CO.(HK) LTD.
6) MALAYAN INSURANCE CO.(UK) LTD
7) MALAYAN ZURICH INSURANCE CO., INC.
8) TOKIO MARINE
9) GPL HOLDINGS INC.
10) GREPALIFE
11) PACIFIC PLANS.
12)PAN PACIFIC COMPUTER CENTER INC.
13) GREPALAND
14) NIPPON LIFE OF THE PHILS
15) HOUSE OF INVESTMENTS, INC
16) EEI CORP.
17) PHILROCK, INC.
18) LANDEV CORP.
19)HI-EISAI PHARMACEUTICAL INC.
20) HONDA CARS- FAIRVIEW
21) HONDA CARS- MANILA
22) HONDA CARS- MARIKINA
23) ISUZU- MANILA
24) ISUZU - COMMONWEALTH
25) IPEOPLE , INC.
26) MAPUA INSTITUTE OF TECHNOLOGY
27) PEOPLE ESERVE
28) FUNERARIA PAZ SUCAT
29) MANILA MEMORIAL PARK CEMETERY
30) FIRST MALAYAN LEASING AND FINANCE CORP.
31) ZAMBOANGA INDUSTRIAL FINANCE CORP.
32) RCBC CAPITOL CORP.
33) BANKARD
34) RCBC SECURITIES INC.
35) RCBC UNIVERSAL BANK
36) RCBC SAVINGS BANK
37)RCBC TELEMONEY EUROPE
38) RCBC INTERNATIONAL FINANCE LTD.
39) RCBC CALIFORNIA INTERNATIONAL INC.

 
At Thursday, July 14, 2005 9:26:00 PM, Anonymous Anonymous said...

vicente said: "The problem, however, is how much is that present value? How does one compute the present value of an unknown amount?"

This is my simplistic view of things. Assume two non-availing planholders as of now.Planholder A will avail in 2 years; Planholder B in 5 years. Both hold College 4 Exclusive plans.

Instead of trying to determine what will be the future value of tuition in 2 and 5 years, then discounting them backwards to get present value assuming a certain rate, can we just use the present average tuition within the category of College 4 Exclusive, then multiply the current ave. tuition by 4 years? If average tuition now is P100,000, both planholders will get P400,000 each for their 4-year college plans.

Both Planholder A and B will get the same amount today, irregardless of the fact that Planholder B will be availing 3 years after Planholder A's first availment and irregardless of the school each one's child will end up in. Should it matter to Planholder B that he will need more money down the road than Planholder A in his first year of availment?

Maybe, maybe not. But if Planholder B gets the full value of the average college tuition TODAY for the entire 4 years of college, he will have a chance to manage that money for the next 5 years (all within his control and not dependent on YGC) and make it grow so that he can cover, to some extent, inflation and tuition increases before his first year of availment.

It may not be so attractive to those who bought in the secondary market since they bought their plans at prices that anticipated future inflationary increases. I understand some college plans were bought for anywhere from P250,000 and up. But this will be a lot better than the measly amount PPI is offering now (based on original plan value + 7%, less the tuition support amount that we got this year, and even less if the liquidity window is availed earlier than 2010).

Who knows? We could just end up being better fund managers of our own money than RCBC trust has been all these years with ours.

 
At Thursday, July 14, 2005 10:12:00 PM, Blogger SunTzu said...

I agree with Anonymous. The method he discussed was actually the most realistic and was agreed upon by most of the parents I have talked to.

Now if only PPI will have the sense to offer that to the parents instead of some insane 2010 plan

 
At Thursday, July 14, 2005 11:00:00 PM, Anonymous Anonymous said...

Sun Tzu, am glad that there are other parents who are like-minded like us. We all want justice but we are also pragmatic.

Oh....by the way, I am a SHE :-)

 
At Friday, July 15, 2005 12:03:00 AM, Blogger SunTzu said...

My apologies Ms. Anonymous....
Seeing that the previous article was spammed, I would like to add my comments on that area.

Definitely the Trust arrangements can be transferred to someone else (friendlier bank) but ultimately, given the ongoing situation and the "manueverings" of PPI, I was under the impression that there is a status quo mandated by the SEC to the trust banks.

Might be wrong choice of words or misread of the situation but I would think SEC sees what PPI has been trying to do and would ensure the funds stay where they are and are kept in investments that are really truly liquid.

And I would hope that the SEC would bring the planholders and PPI together to iron out something. The pre-need education industry is shot to pieces right now. If you ask me it is all over but the shouting for such plans.

(Funny I was told by someone high up in the Federation that memorial plans actually grew quite a bit during this whole "crisis" period.)

Why else would PPI want to run a company that is doomed bec. their reputation is "dead". It makes business sense to negotiate now - SEC should take the lead.

 
At Friday, July 15, 2005 7:56:00 AM, Anonymous Anonymous said...

This comment has been removed by a blog administrator.

 
At Friday, July 15, 2005 8:35:00 AM, Anonymous Anonymous said...

In a perfect world you would really expect the SEC to step in more forcefully to correct misbehaving corporates such as the case here. However in the practical world, the squeaky wheel gets the grease. Not the grease in the slimy bribery sense but the appropriate action.

Again if we do not do anything individually or together, this will drag on to our detriment as pointed out earlier.

Only with leverage do you bring a recalcitrant party into a negotiating table.

 
At Friday, July 15, 2005 9:11:00 AM, Anonymous Anonymous said...

In response to:

"Maybe, maybe not. But if Planholder B gets the full value of the average college tuition TODAY for the entire 4 years of college, he will have a chance to manage that money for the next 5 years (all within his control and not dependent on YGC) and make it grow so that he can cover, to some extent, inflation and tuition increases before his first year of availment."

I think we are forgetting one important fact, that the trust fund is not liquid, it is all in Napocor bonds. Thus, any chance of payment to all planholders at this time is virtually NIL.


With what is going in our country,i.e. downgrade of credit ratings,loss of investor's confidence, an early redemption of bonds will give us a lot less. All sovereign bonds are affected even ROP. The only good thing for us ,but not our country, is that by 2010 our dollar dominated bonds will be worth a lot more due to foreign exchange gains ($1:100PHP ?).

 
At Saturday, July 16, 2005 5:15:00 PM, Anonymous Anonymous said...

"I think we are forgetting one important fact, that the trust fund is not liquid, it is all in Napocor bonds. Thus, any chance of payment to all planholders at this time is virtually NIL."

Maybe YGC could be convinced to "advance" the present value of the equivalent projected Peso amount of the US dollar maturity value of the NPC Bonds. We will get paid (though maybe not as much as we would have liked) and YGC will be left holding the NPC Bonds and the exchange rate risk up to 2010.

 
At Sunday, July 17, 2005 10:03:00 PM, Anonymous Anonymous said...

Did anyone read the Star yesterday? Mention was made that BPI is planning to buy RCBC. How will that affect Pacific Plans? Will we be paid as promised as the sale will mean YGC will become liquid? Or is that wishful thinking?

 
At Sunday, July 17, 2005 11:11:00 PM, Anonymous Keep it simple said...

"This is my simplistic view of things. Assume two non-availing planholders as of now.Planholder A will avail in 2 years; Planholder B in 5 years. Both hold College 4 Exclusive plans."

I agree with Anonymous-I-am-a-SHE. The best thing PPI can do is to give us the current average tuition multiplied by number of years to be availed. It's the cheapest way out for them. Could someone calculate how many millions they would be saving themselves if they did this?

 
At Monday, July 18, 2005 7:37:00 AM, Anonymous Anonymous said...

Did anyone read the Star yesterday? Mention was made that BPI is planning to buy RCBC. How will that affect Pacific Plans? Will we be paid as promised as the sale will mean YGC will become liquid? Or is that wishful thinking?

More like wishful thinking as , if the story is true, the proceeds of the sales will be for RCBC only as it has its own corporate identity, stockholders, etc.

 
At Monday, July 18, 2005 11:52:00 AM, Anonymous Anonymous said...

Is this where we are headed? It seems SEC is for paying planholders based on termination values. In our case this is only 50% of the amount paid!!!

This will become the precedent for all troubled pre-need companies.

---------------
Pre-need firm sells assets to pay planholders


by ANA MARIE MACUJA


Troubled pre-need firm Asian Diamond Plans, Inc. (ADPI) has started to liquidate some of its assets to pay-off planholders, an official from the Securities and Exchange Commission said.


The SEC official said the first tranche of ADPI’s liquidation process is now under way and readily liquefiable assets are now being liquidated to settle a portion of its planholder obligations.

The second tranche would involve the sale of ADPI’s condominium units in Mandaluyong City. Proceeds of such sale will also be used as payment to planholders.

ADPI has sold more than P101 million education, pension and life plans. Of the total, only P38 million will be paid as the company does not have enough assets to cover all of its liabilities.

The company is now under a Liquidation Committee for its failure to address its trust fund deficiency and company liquidity problems. The Management Committee is composed of SEC General Accountant Robert Manabat, Federation of Pre-need Companies president Juan Miguel Madrigal-Vazquez and Elvie Tauyan.

Based on a report presented by the Mancom to the Commission en Banc, ADPI has total liabilities of P282 million as of end December last year. Meantime its Actuarial Reserve Liability (ARL) for the same period is P191.65 million.

The company however does not have enough assets to cover all its liabilities. Its total assets as of yearend 2004 amounts to only P161.66 million leaving the company with a negative equity of P120.34 million.

Based on the recommendation filed by Mancom, the liquidation of ADPI’s assets should be based on terminal value of plans which considers the timing of collection of the contract price from the planholders.

"If the liquidation of the company’s estimated assets value of P63.59 million will be based on total contract price paid by planholders which amounted to P173.16 million each planholder will get more or less 37 centavos for every peso paid," the Mancom said.

"If it is based on terminal values of plans which amount to P86.58 million or 50 percent of total amount paid, each planholder will get more or less 73 centavos for every peso of the terminal value," it added.

 
At Monday, July 18, 2005 12:09:00 PM, Anonymous Anonymous said...

"Is this where we are headed? It seems SEC is for paying planholders based on termination values. In our case this is only 50% of the amount paid!!!

This will become the precedent for all troubled pre-need companies."

Comparing to the offer by PPI as against this, I believe Peptrad planholders will get to receive more than the 50% termination values offered by the other companies and as approved by SEC.

 
At Monday, July 18, 2005 4:49:00 PM, Anonymous Anonymous said...

While things are in a lull, allow me to dream of a scenario where the mammoth YGC has also taken some reprieved or rest in all this hellish consequences that they/we all have gotten into. After the smoke has a bit settled down, YGC as say a lizard is slowly able to take some rest from the multitude of ants that have attached him due to his daringness or mischievousness and has seen or tasted the consequences by not practicing good judgment. He is now able to asses the situation more clearly, less confrontational, although with wounded ego. He can now go down to his inner conscience, and weigh things in a moral point of view. Not vindictive, arrogant but more humane in all aspect. He might have loss his tail but this will grow back if it heals well if not infected with bad faith. His swollen eyes and ears will soon subside in time and he will soon be back to normal and can live happily ever after.
In real sense, if I where the Yuchengco’s, after I have calmed down and have search deep in my heart of wisdom, I will accept that in business, “some times Yu win, some times Yu loss”! Losing in Billions this time is nothing compared to losing everything including your name in the business world. Yu have more of this Billions already stashed all over the world after all this years of “wining some and all of the time”. There is still time to heal for every body including grieving parents and their children’s anxiety. By making a few Billion peso sacrifice, time will heal all wounds, unless infected with bad faith. Yu can even show others who is watching your back and in the same predicament that a good businessman always live or die with honor. Don’t Yu worry, I am sure this will not kill you, having profited all this years with all the businesses that Yu have gone through. I promise Yu that alls well that ends well, and all generation to come after us will REMEMBER your name with INTEGRITY!!!
…mighty mike

 
At Tuesday, July 19, 2005 1:45:00 PM, Anonymous Anonymous said...

Can someone check this out? I read in one of the major dailies (either star or inquirer) that a certain Alfredo Antonio was nominated to the Monetary Board. I know that a former president of PPI sometime in late 90's (like 97,98) was Alfredo Antonio. How can someone with that kind of track record serve in the Monetary Board!!??? I think this is the same guy that is currently in SBMA. I think also that it was during his time that PPI discovered anomalies in transferring plans from one holder to another.

 
At Wednesday, July 20, 2005 8:33:00 AM, Anonymous Anonymous said...

This comment has been removed by a blog administrator.

 
At Wednesday, July 20, 2005 10:28:00 AM, Blogger PEP COALITION said...

Please keep postings relevant to the topic at hand. We will eventually discuss the poll results so any discussion on that topic should be reserved for when everybody's view has been taken in.

Off topic postings will be taken down. We hope all of you understand.

Thank you.

 
At Wednesday, July 20, 2005 9:27:00 PM, Anonymous Anonymous said...

"I think we are forgetting one important fact, that the trust fund is not liquid, it is all in Napocor bonds. Thus, any chance of payment to all planholders at this time is virtually NIL."

Maybe YGC could be convinced to "advance" the present value of the equivalent projected Peso amount of the US dollar maturity value of the NPC Bonds. We will get paid (though maybe not as much as we would have liked) and YGC will be left holding the NPC Bonds and the exchange rate risk up to 2010.

In line with these ideas, if there’s good intention to resolve PPI’s default to their plan holders, there will always be ways to for the YGC to find solutions, and come up with a win-win or win-loss some compromise. When the YGC was swimming in cold CASH from our hard earned money, they where juggling our money from one YGC to another. Insurance coverage for plan holders, investment, trust fund, brokers for NPC bond, etc, etc, and etcras! In other words they feasted on our hard earned money from the very start. The availing plan scholars are kept hanging since the last availment has just passed and quarter-mesters and tr-imesters and semestral enrollees are all in fear of not enrolling these coming enrollment dues. My question is, if the Yuchengco’s really wanted to save his scholars from not continuing their studies, it’s all within his power to do it. The NPC bond can be use as the maturity of availing plan arises and need not be liquidated all at once. Portion of the bonds certificate can be surrendered to any of the YGC holdings as collateral to settle maturing availment. YGC do not loss anything from this juggling, because the loss of one is gain of the other. Since the NPC bond are U$ Dollar Bond, I don’t see how it will be hard for YGC to do this act. When maturity comes the Peso Dollar could even be a wind fall to any YGC holding the bond, “legal pa!” Maraming paraan pag gugustuhing tumulong at marami din dahilan pag ayaw mag bayad! Besides, it’s our money any way that’s locked in the NPC bond. Why not use it, we’re not asking you to lend us money again; I understand that the Php 250 M that was use to the last availment was not really from your own pocket but a loan to PPI! Please have a heart, use your business experience for the greatest good, if only you’ll have a change of heart and see things from a point of view of helping our children, solutions will be aplenty, Yu know it, I know.
…mighty mike

 
At Thursday, July 21, 2005 8:03:00 AM, Anonymous cheech said...

I am trying to balance what I think will happen realistically and what I hope will happen before I vote in the poll. I attended the last Senate hearing and one of the SEC people said that what PPI actually filed was a "liquidation" plan although PPI filed a "rehab" plan. If this is so, and it seems at least one SEC official is of that opinion, then the probability of getting the PV of our plans now is very low. If we think of a scenario where a Mancom will come in, like Asian Diamond in the article above, a liquidation scenario is even more likely. But then again, this Asian Diamond might not have other affiliates to think of like PPI. So we are again down to wishful thinking that the Yuchengcos will do something now or at least before April/May next year to pacify the planholders. Though I want to fight it out and put them to jail and risk my kid's plan, it is a heavy burden to bear for a parent. I might have to, if only to prevent this from happening again. I'm hoping to get some encouragement from the site.

 
At Thursday, July 21, 2005 9:26:00 PM, Anonymous Decide now! said...

"I am trying to balance what I think will happen realistically and what I hope will happen before I vote in the poll."

To Cheech, the quintessential fence-sitter: If the 34,000 planholders keep hemming and hawing and hesitating, NOTHING will happen. Take a chance and ACT!
To the core members of the coalition: you are to be admired and congratulated for having the courage to ACT even if the whole deck seemed stacked against you. If it wasn't for your positive example, we would be NOWHERE now, and Pacific would never have come to the bargaining table. MABUHAY, you guys!!

 
At Friday, July 22, 2005 9:54:00 AM, Anonymous Anonymous said...

I heard on the news last night and read in the papers this morning that YGC has come to bargaining table... Kudos to the Coalition Core Team - - your bravery and perseverance is admirable - -. Keep it up and keep us posted...

 
At Friday, July 22, 2005 10:20:00 AM, Anonymous cheech said...

to "decide now"
Sorry, am not just a fence sitter. I joined and participated in all the meetings/ school chapter mtgs, sweated it out with all of you in the prayer rally and Mkti rtc, went to the Senate hearings and joined the text and phone brigade. I did vote to bring ppi to justice after i posted the comment. So i'd like to correct the impression i might have created that i am just hemming and hawing. Thanks for the encouragement, though. My deepest thanks to Phillip, Winnie, Vic O., our legal and finance teams.. your leadership and drive are admirable. We cannot thank you guys enough.

 
At Friday, July 22, 2005 11:24:00 AM, Anonymous Book Hunter said...

WOW! No wonder it's been so quiet on the blog. Good work! We're behind you all the way.

Plan holders, firm seek settlement

By CAI U. ORDINARIO, The Manila Times Researcher

Pacific Plans Inc. will amend its rehabilitation petition to provide better payment terms for the company’s plan holders.

In a joint press conference, PPI and plan holders’ group Parents Enabling Parents Coalition announced a settlement plan that would require the preneed firm to compensate plan holders at a better price.

The two parties agreed that PPI would pay plan holders based upon present value. This meant that the company would be paying its clients at the current value of the plan based on current tuition prices starting school year 2005.

The payment, however, would be based on available liquidity, said Ernesto Garcia, PPI president. There is also an option to monetize the preneed firm’s National Power Corp. bonds, which are set to mature in 2010.

For its part, the parents’ coalition said it will negotiate terms to include a seven percent interest rate to be placed on the current value of the plans which would all be paid in a span of four years.

Availing plan holders will receive an entitlement for unavailed years based on the tuition fee for School Year 2005-06, while non-availing plan holders will receive an entitlement based on the current average tuition fee per category of schools as of School Year 2005-06.

Philip Piccio, a plan holder who heads the parents’ coalition, said negotiations would start on July 25. An agreement is eyed within 30 days from the start of the two parties’ talks.

The settlement came before the parents’ coalition could file a case against Yuchengco-owned Rizal Commercial Banking Corp. (RCBC) for antitrust violations. The bank, which is chaired by Helen Yuchengco-Dee, a former PPI president, is a trustee bank of the preneed firm.

 
At Friday, July 22, 2005 1:23:00 PM, Anonymous Anonymous said...

This is a really great development. Hat's off to the core members. You did a good service to the nation. Preserving the dreams of our youth, the future of our nation.

I hope we continue to be vigilant and dont let them pull another fast one on us.

God Bless to every one.

 
At Friday, July 22, 2005 1:50:00 PM, Blogger SunTzu said...

While I am sure the core members appreciate recognition of efforts, in case the negotiations dont go the planholders way, we should all be prepared to be more active and not fence sit.

I have noticed a lot more mail now on the egroups as people are very happy and rejoicing. This is but a start but we have all seen what YGC has done.

Why they suddenly called and asked to negotiate - very suspicious but we give benefit of the doubt.

So if this is all a ploy for political purposes and things dont pan out I really hope more planholders become much more active because the core has only so many hands.

Volunteer!!!!! for a Committee and be counted

 
At Friday, July 22, 2005 3:51:00 PM, Anonymous Anonymous said...

congratulations to the core group! without your unselfish efforts, the Yuchengcos could have gotten away with it. but we have to be careful, heard that this is just a political strategy of gma since she plans to include this item in her SONA as one of her achievements. Then when we have used, PPI will say after 30 days that we were not able to come up with an agreement agreeable to both parties. and by that time, the heat is already off. Hope that this is not true. so we still have to be vigilant. Anyway, again thank you to all the people who are really working hard for us. if only i am not working double jobs just to make ends meet, i could have helped more. Thank you again and God bless you all.

 
At Saturday, July 23, 2005 11:35:00 AM, Anonymous Anonymous said...

you are right! though things seem favorable to us, we can't help but wonder; is ppi/ygc sincere? after what they've done to us, i can not rejoice until i have all their promises in my hand! remember, they are still pushing through with the rehabilitation. i don't understand why! i don't know also where they'll get the funds to pay us but for sure they have the funds!

i thank all the officers and members of pep-coalition!!! maybe by now walang mga anti pepci!!!

May God be with us all!!! And may we not lose hope at all!!!!

 
At Saturday, July 23, 2005 5:03:00 PM, Blogger mario said...

I also heard from both ABS-CBN and GMA TV news last night that the Government will make available one (1) Billion Pesos to planholders of pre-need companies, PEP & CAP for the second semester of this school year 2005-2006. We have two more availments before my daughter will graduate next year from La Salle Taft. At last our prayers are answered. Thanks to the officers of the PEP Coalition. We can now at least sleep better. We, however, should maintain our vigilance so that this bad dream will not happen again... msliggayu

 
At Saturday, July 23, 2005 6:46:00 PM, Anonymous Anonymous said...

.
Anonymous said...
congratulations to the core group! without your unselfish efforts, the Yuchengcos could have gotten away with it. but we have to be careful, heard that this is just a political strategy of gma since she plans to include this item in her SONA as one of her achievements. Then when we have been used, PPI will say after 30 days that we were not able to come up with an agreement agreeable to both parties. and by that time, the heat is already off. Hope that this is not true. so we still have to be vigilant. Anyway, again thank you to all the people who are really working hard for us.
SunTzu said...
While I am sure the core members appreciate recognition of efforts, in case the negotiations dont go the planholders way, we should all be prepared to be more active and not fence sit.

I have noticed a lot more mail now on the egroups as people are very happy and rejoicing. This is but a start but we have all seen what YGC has done.

Why they suddenly called and asked to negotiate - very suspicious but we give benefit of the doubt.

So if this is all a ploy for political purposes and things dont pan out I really hope more planholders become much more active because the core has only so many hands.

Volunteer!!!!! for a Committee and be counted


Vigilance is the next move we should take. We still need to polish our plan B to E as planed fall back until we see the check for our children’s next enrollment. Just like in war, we should keep our guns well oiled and ready, because this might just be a ploy by the enemy to regroup, buy time, and even infiltrate our camp and offer big bucks and many virgins to who ever they can. Mean time a partial congrats to all who made things possible.
…mighty mike

 
At Sunday, July 24, 2005 1:37:00 AM, Anonymous Anonymous said...

Anonymous wrote...

"Can someone check this out? I read in one of the major dailies (either star or inquirer) that a certain Alfredo Antonio was nominated to the Monetary Board. I know that a former president of PPI sometime in late 90's (like 97,98) was Alfredo Antonio. How can someone with that kind of track record serve in the Monetary Board!!??? I think this is the same guy that is currently in SBMA. I think also that it was during his time that PPI discovered anomalies in transferring plans from one holder to another."

Yes, the Alfredo Antonio who was appointed in the Monetary Board was a former President of PPI and ex-SBMA chair. If I'm not mistaken, he resigned 2001 or 2002. I understand he had some conflicts with the Yuchengcos, most probably Helen Dee. Maybe during his time, he was already being "ordered" by HD to execute the "PLAN" and which he was not agreeable to. He may have left PPI because of this. In addition, when Antonio was the President, one of the BOD members was Alfredo Yuchengco III. And when Antonio left PPI, so did AYIII. This could be the time when HD and AYIII also had some conflicts.

 
At Sunday, July 24, 2005 4:43:00 PM, Anonymous Anonymous said...

We just have to be hopeful there is sincertity by PPI to find a compromise solution. We don't have a choice anyway. We can insist and fight for what we really want but it may take years and years. And when the old man passes away do you think Helen Dee would even face us? I think we have to be pragmatic in being a little hopeful. With up coming children for college i wouldnt afford contributing to a court case and waiting for a resolution to it. I might be dead by them. So lets hope...and Pray!

 
At Monday, July 25, 2005 12:25:00 AM, Anonymous Anonymous said...

two thumbs up to PEP coalition officers on their quest for justice on behalf of us all vs. the Yuchengco's 2010 scheme or rather scam!!! way to go...

 
At Tuesday, July 26, 2005 4:56:00 PM, Anonymous Anonymous said...

.Pacific Plans Inc. will amend its rehabilitation petition to provide better payment terms for the company’s plan holders.
.The payment, however, would be based on available liquidity, said Ernesto
Garcia, PPI president.
.For its part, the parents’ coalition said it will negotiate terms to include a seven percent interest rate to be placed on the current value of the plans.
.Availing plan holders will receive an entitlement for unavailed years based on the tuition fee for School Year 2005-06, while non-availing plan holders will receive an entitlement based on the current average tuition fee per category of schools as of School Year 2005-06, which would all be paid in a span of four years.

Our Blog Coordinator or who ever post the main subject to be discuss should start the ball rolling on what we have in mind regarding the turn of events and how we want the settlement be settled once and for ALL. This will gather individual sentiment and ideas on the matter. Considering our penchant in letting things go and in the end we howl and claw that it should have been this way and that way and “away na” in the end. “ Ke nagkaayusan na, at lahat ng ka ekekan”.
For my three cent part, if we will have to put value, interest, penalties and all the tools that banking and finance use in computing for my plan every time I defaulted on my payment, it should also be use in this settlement. They should practice fair play when it’s them that are defaulting. Others where complaining that their properties where taken, or very high interest and penalties where slap on them when they defaulted. Businesses lord over our country due to government neglect. Credit card interest is almost close to Bumbay usurer, at 3.50 % monthly interest. In other countries its only 1% + if I remember right. Savings, loan interest are way too wide to be justified. Business in banking and finance is the only business doing very good in this part of the world, unless you loss your name. If the YGC want to stay in the business, practice due diligence and apply your rule to all your dealings and pay this time and keep your name in the business world intact even if it hurts. You’ve hurt a lot of families and paying for all this mess is not even enough to heal our agony. You brought trouble to our families’ bedroom, breakfast table, and sexlife!
… mighty mike

 
At Tuesday, July 26, 2005 10:08:00 PM, Anonymous Anonymous said...

We can always ask for the MOON from PPI and continue with our case if they don't givn in to our demands. Question: Can we sustain a protracted case?

 
At Wednesday, July 27, 2005 3:07:00 AM, Anonymous Anonymous said...

Anonymous said...
We can always ask for the MOON from PPI and continue with our case if they don't givn in to our demands. Question: Can we sustain a protracted case?
Tuesday, July 26, 2005 10:08:50 PM

Asking them to play fair and apply their business formula in the reveres, meaning turning the table around and be on the receiving end is not asking for the MOON. We’re just asking if they can play fairly on their own rules. If not then lets continue dancing in their own terms. But I can not accept being violated sometimes and all the times. Losing material possession (money) will surely hurt me and so with the YGC in the long haul, but integrity and honor is something I have learned to value which money can’t buy. Can they/we sustain a protracted case? Its hurting them by the minute, days and months now. RCBC balance is on the down spin, no new account is coming in. BPI is breathing at their shoulder. They are a big trophy in the banking circle. Next year Malayan Insurance policy renewal is bust. Families, friends and business associates are one in not renewing their life and non-life policies. Some of the Chinese business networks have even closed their account and instructed their collection department not to accept RCBC check payments, canceled their employees insurance benefits and non-life insurance, even when this whole brouhaha was a month old. I know because I volunteered my time in one of the committees that supported this cause. We have the Pilipino- Chinese group as members to attest to this. They have their fall back offense in tack if these wars continue next year. I lose my investment; they lose The EMPIRE that was made several decades ago. That’s the only reason they are raising the white flag, second only to their name in the business circle. We have them by the jugular; they have all the means to settle this on a level playing field. They’re not going to lose their shirt to this one but more if this goes on in a long hot summer months.
… mighty mike

 
At Thursday, July 28, 2005 6:48:00 AM, Anonymous Anonymous said...

Asking for the moon is asking for a fair shake. That is the situation and we have to be pragmatic about it. We may hurt YGC big time, but with the money they have accumulated throughout the years, they can go down with the Yuchengcos laughing all the way to the bank, while we end up having our children in public schools and our children in colleges in the provinces. At this point the most pragmatic thing to do is find a win-win situation that would allow us to get whatever they promise in 2010 NOW with interest of 7% accumulated for "that" period. I dont know if that is acceptable to all. IF the promised amount for example plus interest in 2010 is P150,000, i would be happy getting all that now and investing it rather than waiting until 2010 and being unsure that same amount will be there. With a case now and a protracted war i'd be left with nothing. But that is my own opinion. I know there are others with different opinions. At this point we have to share these opinions to get the consensus of all.

 
At Friday, July 29, 2005 3:50:00 PM, Anonymous Anonymous said...

Why is this blog suddenly so quiet? Shouldn't there be a topic started on the 'negotiations' with pacific plans to allow the other parents to weigh in with their side? Surely whoever is negotiating with pacific plans would want to hear the opinions of all parents concerned.

 
At Friday, July 29, 2005 10:39:00 PM, Blogger SunTzu said...

Patience my friend. Very soon you will have what you wish to your hearts desire . . . .

 
At Saturday, July 30, 2005 7:56:00 AM, Anonymous cheech said...

Negotiating for the "moon" is a good start, i agree with mighty mike. I think we should start high and show YGC that we mean business. That is not to say that we will not consider all the other factors that come into the picture, including most importantly, their liquidity. We also have to keep in mind that this will be a test case for all other pre-need companies that plan to do a yuchengco. We have to put on the pressure now bec. we know they are hurting. If the other affiliates have to advance to PPI, buy those NPC bonds or whatever, they should do it and soon.

 
At Saturday, July 30, 2005 10:10:00 PM, Anonymous Anonymous said...

Got this from abs-cbnnews.com. Special mention of our blog...

---------------------------------

A blogging offensive



VIRTUAL BUSINESS By TONY LOPEZ


Heard about blogs and blogging? It stands for web logging (weblog or blog for short) for making notes or broadcasting anything (including videos) on the web.

Heard about blogs and blogging? It stands for web logging (weblog or blog for short) for making notes or broadcasting anything (including videos) on the web.

People who indulge in it are called bloggers and what they write or broadcast are called blogs. It’s the latest craze on the Internet. And it’s free. You can create a column at the blogspot.com even without the need for revealing your true identify, your name, your sex, your profession, your address or saying whether you are a human being or an animal or a plant, though you may adopt the names of plants and animals as your pseudonyms. You write what you want on any subject under the sun.

You can say all the nasty things about your bete noire without fear of retribution, legal, personal or spiritual.

(Apparently, murderers of mediamen have not yet discovered that there are mediamen lurking in the web). There are no ground rules and the laws of libel apparently do not apply—yet. How can you sue someone you don’t know and sue for something you are not aware of? That’s how dangerous and powerful the thing is.

Bloggers are even contemptuous of MSM—mainstream media, those of us who write or work for legitimate publications and broadcast stations. Bloggers are not yet considered legitimate journalists, but many of them managed to get press accreditation at the US Democratic and Republic conventions last year.

BusinessWeek estimated last April that there were nine million blogs out there and they multiply by at least 40,000 new blogs daily. So by this time, there should be more than 10 million blogs—more than the combined circulation of the largest and most prestigious newspapers in the US.

In the US, bloggers brought down the TV institution Dan Rather. They denounced his so-called investigative report on the military service (or lack of it) of President George W. Bush based on memos which turned out to be spurious. So Rather had to retire prematurely. Bloggers disciplined giant Microsoft, which wanted to stop public discussion (and criticism) of its new products before their commercial launch. Bloggers forced Apple Computer to come out with a more reasonably priced battery for the popular iPod. (Before this, you had to buy a new iPod to replace your iPod with defective battery). General Motors used blogs to get even with the Los Angeles Times when the latter refused to make retractions in its critical reviews of GM autos.

Here in the Philippines, bloggers have zeroed in on the Al Yuchengco Group in the aftermath of Pacific Plans’ declaration of bankruptcy and refusal to pay in full the tuition fees of some 16,000 plan holders this school year. If they succeed, this will be the first time that a cheap but modern technology like blogging will bring down a venerable business empire to its knees.

Apparently, the Yuchengco people and all their engineers and scientists at Mapua and La Salle, not to mention the in-house IT departments of the big AY companies, RCBC, Malayan and Grepalife, are not even aware of the kind of calumny heaped upon them daily by irate and frustrated PPI plan holders.

In their blogs, at www.pacificnoplan.blogspot.com, now on its second month, anonymous PPI plan holders urge a boycott of Yuchengco companies and their products and services. They point to the losses of Bankard Inc. and EEI and the seemingly modest profits of Grepalife and Malayan. They are even claiming that RCBC is for sale. They say many unflattering things about PPI president Sonny Garcia and his previous work. So far though, the bloggers are treating AY with respect.

The anti-PPI bloggers even have an honor roll of media men they perceive sympathetic to their cause: Dong Puno, Winnie Monsod, Oca Orbos, Jarius Bondoc, Rina Jimenez David, Vic Agustin, Boo Chanco, Erwin Tulfo, Angelique Lazo, Alcuin Papa, Jojo Robles and Raffy Tulfo.

If the Yuchengco people do not make an aggressive response and clarify all the allegations in the blogs, they will wake up one morning knocked out and not knowing what hit them. The way to respond to bloggers is to create your own counter-blog, reply to each blog with your own blog. You cannot adopt an ostrich-like attitude.

Looking forward, blogs should be an effective medium to bring down a corrupt and incompetent government. Joseph Estrada was supposed to have been brought down by text messaging. Luckily for our officials, blogging has not caught on in the Philippines. The problem is the high cost of computers and the relatively high cost of subscribing to the net. But you need only a few influential bloggers to discipline a certain erring company or deliver a comeuppance on a corrupt public official.

So sakay na, sa blogging.

 
At Saturday, July 30, 2005 10:29:00 PM, Anonymous Anonymous said...

Bank mergers coming


VIRTUAL BUSINESS By TONY LOPEZ

The banking industry is inferment. Bangko Sentral Governor Amando Tetangco told me there will be another round capital buildup requirement in the next two years.


The banking industry is inferment. Bangko Sentral Governor Amando Tetangco told me there will be another round capital buildup requirement in the next two years.

This should force banks to enter into a new round of mergers, acquisitions and consolidation. We need to have fewer but bigger banks. The entire banking system is not even enough to approximate size of Bangkok's or Singapore’s biggest bank. That’s how small our banks are.

The Ayala-controlled Bank of the Philippine Islands has already started the buying or merger spree with its purchase of up to 100 percent of the conservative Prudential Bank for P6.13 billion. The bank is owned by the Santos family headed by Jose L. Santos, president. The Ayalas are paying P746.43 a share, or an 85.7-percent premium over Prudential’s share price of P400 average in the first quarter this year. With Prudential’s 187 branches, the Ayalas paid about P32.7 million per branch. Based on last year’s earnings each share of P51.45 (down 55.6 percent from 2003), P746.43 is about 14.5 times earnings, not low but also not high.

Prudential, however, has plenty of prime properties.

Its 4,557-square-meter parking lot at Valerio, Salcedo Village could probably fetch P500 million and the 1,699-sqm vacant lot at the Madrigal Business Park could possibly be sold for P200 million. Among other valuable properties are: 1,497 sqm on Ortigas, Greenhills, 1,628 sqm on Escolta; 3,804 sqm on Naval Street, Navotas; two lots of more than 1,000 sqm on UN Avenue, Manila; 716 sqm inside BF Homes Parañaque; and 1,699 sqm at the Madrigal Business Park, Alabang.

So on a few properties alone, Ayala would be able to recover easily P1 billion of what it paid for Prudential.

The owners had to sell Prudential Bank apparently because they saw the handwriting on the wall. The environment has changed drastically.

The business has become highly competitive and sophisticated.

A number of its customers were shifting to other banks because these banks have more ATMs in place or are offering Internet and phone banking. Profits from banking were increasingly being derived from consumer banking which is very expensive to service unless a bank has economies of scale and sophisticated technology.

To keep pace with the competition, Prudential had to shell out more money, something which the owners are apparently not very enthusiastic about. Prudential Bank has a good partner in Bank of Tokyo Mitsubishi, which owns 12 percent.

It seems it was Delfin Lazaro who tipped BPI Chair Jaime Augusto Zobel de Ayala about the Prudential Bank opportunity. Del sits as an independent director of Prudential Bank and is also the CEO of AC Capital which takes care of Ayala’s growing businesses.

Another object of buy interest is Philippine National Bank. Ten bidders have been prequalified, including Newbridge Capital of Hong Kong, Bank of PI, and Union Bank. Sixty-seven percent of PNB will go for P16 billion at P43 a share, cheap considering the bank’s extensive branch network and global presence. But then last year, PNB was selling for half that price.

The bidders could drive up the price to a point that taipan Lucio Tan, the bank’s major owner, would opt to sell, rather than buy PNB.

PNB has still about P50 billion of bad loans, huge by any measure. And there is the legal overhang about the $700 million (P39 billion) escrow deposit released by PNB to the Philippine government last year, but which money probably belongs to Imelda Marcos who has not been convicted for concealing ill-gotten wealth.

The Swiss banks have said the deposit could only be released to Manila once Mrs. Marcos has been convicted with finality.

Also not to be ignored is Equitable PCI Bank. The country’s third largest lender is in the middle of a board control struggle between the Antonio Go family and the government. GSIS President and GM Winston Garcia says he is willing to sell the pension fund’s 12 percent "if the price is right." My suspicion is that GSIS will blend its 12 percent with the 25.8 percent of SSS to create a 45-percent bloc big enough to attract a buyer. Winston wants to sell at his original acquisition price of P90 a share.

Equitable is selling about half that at present.

If Prudential Bank could be sold for 87 percent premium over market price, why not Equitable?

Item: If you are thinking of buying a Best Tank product—pumps or water tanks, don’t bother. They have such a bad after sales service you will have a difficult time getting a refund for lemon items. Best Tank doesn’t want to refund or accept returns. Also, the Department of Trade’s consumer protection desk is good as useless. It is manned by petty bureaucrats who don’t care about consumers.

 
At Sunday, July 31, 2005 2:14:00 AM, Anonymous Anonymous said...

.We may hurt YGC big time, but with the money they have accumulated throughout the years, they can go down with the Yuchengcos laughing all the way to the bank,
.At this point the most pragmatic thing to do is find a win-win situation that would allow us to get whatever they promise in 2010 NOW with interest of 7% accumulated for "that"I know there are others with different opinions.
.At this point we have to share these opinions to get the consensus of all. period. I dont know if that is acceptable to all.

… Any more opinions that we should be hearing now? This is the time for all good men and women to speak up. Not after the settlement has been signed and delivered! “Maski suntok sa buan”, at least we’re aiming for something, even the MOON. I’ve given my three cent opinion already, and I’m tempted to throw in some more.
As for the Yuchengco’s laughing all the way to the bank?, yes maybe, but not probably their bank, because RCBC might have gone down with their name and other businesses related to its number one product, TRUST! As to get what they promise in 2010 NOW with 7% compounded and computed to the availment of 2005-2006? If they will pay now, so we can manage it ourselves, sure why not. But how much is fair enough and how soon, when Mr. Ernesto Garcia preemptedly (earnest in his words) said, “according to availability of funds”! ARAY!!! They could just be buying time for another surprise again and turn around and say “mahirap kayong kausap eh”, for a compromise that could be hard to swallow. The way I picture this whole scenario, PPI is like a wounded beast, with no way out but to pass the same corridor which he came in, with us blocking his path also wounded due to his own making. What do we do? 1. Run and make way for the beast that is dying from losing so much blood every minute we stay in his path. 2. Let him pass and wait for his promise to make amends according to availability of his memory. 3. Slice his excess fat so we can have something to feed our children and let him escape and never make us mad again. 4. … sorry I’m getting low bat na,you naman,k gud nite
…mighty mike

 
At Sunday, July 31, 2005 7:48:00 AM, Anonymous Anonymous said...

Mighty Mike,
Why don't we all go for "Broke" by INSISTING that we get the benefits promised us in the agreements in the contracts given us for the plans. Let's not move an inch or give in to any other settlements other than that. Its not suntok sa bulan when we would just be asking for 10x the amount they could give now plus interest. I have a scholar due 10 years from now. By THAT time i am pretty sure tuitiion for an exclusive school will cost not less than P300,000 per school year, thats about P1.2 million for a 4 year course. I bought my plan for P70,000 years ago. By INSISTING that the agreements in our contracts be fulfilled, i tend to be able to AFFORD 4 years of college in year 2015. Hopefully by that time PPI will still be there. That definitely is not "suntok sa buwan".

 
At Sunday, July 31, 2005 8:08:00 PM, Anonymous Anonymous said...

My Option:

For my availing elementary plans, the minimum I want is what I received this year (last year's availment). I am willing to shell out the extra 5% or so annual tuition increase until the last availment year.

For my non-availing high school plans, the minimum I want is this year's average availment of the schools belonging to the same category of my plan. I am willing to give PPI a grace period of 2 years within which no tuition increase will be paid. After which, I am willing to give a maximum cap of 5% annual tuition increase.

 
At Monday, August 01, 2005 11:01:00 AM, Anonymous Harold said...

I will insist in PPI paying the high school tuition of my kid who is in grade 3 now irregardless of how much it would cost by that time (La Salle Greenhills) and his college also in La Salle where i want him to study. There will be no ifs or buts about discounting, paying now at a lower price, etc. Bahala na sila if they think this is "wishful thinking" or "suntok sa buwan." The amount i paid irregardless if it is only 10% of what it will cost by the time my son goes to high school and college is irrelevant as it was stipulated in the contract. Promises are promise.

 
At Monday, August 01, 2005 5:23:00 PM, Anonymous Anonymous said...

Im kinda curious why the CARE and ENLIGHTENED haven't been coming up with press statements after PPI announced that they will now be negotiating with the Coalition. If anyone from these two groups are logging into this blog, I would like to know if you are still willing to settle for rehab terms? I know that whatever agreement is reached between the coalition and PPI, the terms may apply to all planholders. In this event, Im just wondering if Jena, Atty whats his name of the CARE and the MARALITA's will be humble enough to now say that they finally agree with the Coalition or shall they be proud to admit that and stick to what they stood for and that is the rehab plan?

 
At Tuesday, August 02, 2005 12:56:00 PM, Blogger PopsJ said...

When we do our computations, let us not forget to factor in the material cost of every negative dimensions, queueing in mid-day heat, sleepless nights, that feeling of empty stomach, the 'broken dreams' feeling, all these we have endured should form our basis of computations. Anything that can reasonably form a position of justice for all.

 
At Tuesday, August 02, 2005 3:26:00 PM, Anonymous Anonymous said...

Lessons from the Fall
By Lala Rimando
NEWSBREAK Business Editor

The saga between the beleaguered pre-need company, Pacific Plans Inc. (PPI) and a feisty group of planholders has finally reached a happy ending.
The Parents Enabling Parents coalition (PEP), a group that had been severely critical of PPI and the Yuchengcos, was supposed to go in for another kill. Last July 21, they were scheduled to file a complaint against the trustee bank of PPI at the Bangko Sentral ng Pilipinas (BSP) for allegedly breaching the required arms-length relationship between the two. PEP had always made known its moves to the Yuchengcos through intermediaries in the hope that the latter would give in to their demands.

Last April 13, PPI submitted to a court a rehabilitation plan which it had unilaterally crafted, sparking fireworks as PEP contested the plan in court, the media, and in hearings at the Senate and Congress.

The night before July 21, Manila Councilor Don Bagatsing arranged a meeting between PEP and Ernesto Garcia, PPI’s president.

Bagatsing earlier promised to broker the talks when the PEP agreed not to pursue a protest rally during last month’s launch of his project—the renaming of a street in Binondo from Nueva Street to Alfonso Yuchengco Street.

Early on, PEP and PPI did not have an open communication line. For the first time on July 20, Garcia said cooler heads prevailed, thus the PEP became “part of the solution, not part of the problem.”

The quandary that the Yuchengcos found themselves in can be traced to this fact: they were not hands-on with PPI. They left the company’s day-to-day operations in the hands of trusted professionals.

On the surface, the professionals—specifically the actuaries and executive officers—had been doing well. PPI was a profitable business. Every year from 1995 to 2001, cash and stock dividends equivalent to anywhere between P3 million and P21 million had been declared.

Not long afterward, problems in some of the Yuchengcos’ businesses started to emerge. Not only were the Yuchengcos trying to nullify its P1.78-billion purchase of Bankard (they found out it had lots of bad assets), the credit-card subsidiary bought from another bank, but issues about PPI began to surface, too.

How did a company such as PPI, owned by one of the wealthiest families and one of the most respected tycoons in the country, end up like this?

For the multibillion-dollar-worth Yuchengco Group of Companies, PPI, a subsidiary engaged in the pre-need business, is a drop in the bucket. PPI’s total resources of about P10 billion is peanuts compared to the conglomerate’s total resources of about P250 billion.

That was the time Helen Yuchengco Dee, the most astute among the Yuchengco siblings, was plucked out of retirement and assigned to handle these problems.

Two NEWSBREAK sources familiar with PPI’s financial problems said Dee was “outraged” when she learned what was wrong with PPI.

The issues on PPI emerged when the Securities and Exchange Commission (SEC), at that time headed by Lilia Bautista, became serious in carrying out reforms in the pre-need industry. Bautista said she knew the industry was a “bomb waiting to explode,” if the previous cozy relationship between the regulator and the industry continued. She recalled that a 1999 study commissioned by the Asian Development Bank had pointed out the ills of the pre-need industry.

But the focus then was on College Assurance Plan (CAP), the industry leader for educational plans with more than 780,000 clients.

CAP was breaking all the rules. For one, it was not remitting enough assets to its trust fund, a kitty fund for a portion of the premium payments of plan holders that should be prudently invested so the pre-need company could meet tuition payments when its plan holders start going to college. In 2002, CAP lacked P2.5 billion in its trust fund deposits. By 2003, this leapfrogged to a whopping P17 billion. The trust fund should already have been P25 billion, but it only had P8 billion.

Also, the trust fund was invested heavily in real estate belonging to CAP’s sister companies. This included golf shares and raw land that still needed additional capital to develop before being sold to the public.

Pre-need companies set aside 51 percent of the premiums paid by its customers to the trust fund, which it should turn over to trustee banks. The trustee banks are given a free hand in determining how the money is to be invested. The remaining 49 percent remains with the pre-need company to cover its operational and marketing expenses, including the fat commissions of its sales agents. In case the trust fund is not sufficient to cover the present value of its current and future obligations, the company can dip into its profits to make up for the deficiency.

However, in the case of CAP, the company itself is bankrupt. As of 2003, it had a capital deficiency of P5.4 billion because its reported assets of P18.5 billion fell short of its P24 billion liabilities.

Watch List

PPI was second on SEC’s watch list. Its “sins” pale in comparison to those of CAP’s.

SEC saw that CAP and PPI were pushing down the levels for their Actuarial Reserve Liability (ARL), the amount that the trust funds of pre-need companies should meet, otherwise, they are deemed financially unhealthy. By reporting lower ARLs, a company has less pressure to make more deposits.

(CAP used to question the ARL, but the industry association of accountants had already taken the position that both the ARL and the trust funds, for the sake of prudence, should be reflected in the financial statements. CAP’s arguments stem from the fact that trust fund deficiencies reduce company profits. Actuaries—the professionals who make the complex computation of the ARL based on assumptions like increases in tuition and expected yield in their trust fund investments, among others—are supposed to make judgments independently of their employers.)

PPI’s actuaries seemed to have been acting on their own because their financial assumptions surprised even Dee. One way the actuaries pushed down the ARL amount is by using what is called a “termination approach.” It works this way: pre-need plan holders who voluntarily terminate their plan will be reimbursed a certain percentage of the promised benefit. If the premiums have been fully paid, the plan holder can be reimbursed only up to 50 percent.

According to SEC rules, the actuaries’ computation should use the present value of 100 percent of the expected tuition when the child goes to college, not just half of it. Roberto Manabat, SEC’s general accountant, said using the termination approach is not only a way of dodging what is the prudent amount that should be deposited in the trust fund, but also wrongly assumes that plan holders bought the product with no intention of availing themselves of the benefits.

PPI’s actuaries used the termination approach. Like CAP, PPI assumed yields in their trust fund investments that were way too optimistic. For example, PPI’s actuary used 15 to 18 percent as the expected investment yield. Of this, 3 percent is said to be accounted for by the foreign exchange differential in its dollar-denominated Napocor bonds. Still, the 12 to 15 percent assumed yield of the investment instruments is way above the actual performance of the trust funds, which ranged from 5.5 percent to only 10 percent during the period 1999 to 2002.

All these resulted in a need for PPI to deposit P7 billion to add to its trust funds. In 2002, its trust funds were only P8.6 billion, which the SEC adjusted to about P15 billion.

Dee is reported to have sought a two- to three-year leeway to address the deficiency. The SEC agreed because CAP and other companies were allowed to amortize their deficiencies, too.

Evading Obligation?

Fast forward to April 13, 2005: PPI sought the suspension of payments to creditors and submitted a rehabilitation plan to the court.

The SEC was caught off guard by PPI’s move because days before April 13, it continued to coordinate with PPI to hone its proposed programs that it would purportedly implement to deal with the problematic traditional plans. In its response to the court, SEC called the events that led to PPI’S court filings as a “fraudulent scheme to evade its obligation.”

There has been a lot of brouhaha about PPI’s spinning off its fixed-value plans (educational, pension, and memorial) into a separate company, Lifetime Plans, while leaving behind the problematic traditional educational plans with PPI. Sen. Sergio Osmeña III likened this to the practice of “fraudulent conveyance,” which was popularized by American companies RJ Reynolds and Nabisco. It means the assets of these companies were spun off to shove them away from the grasp of the former’s future claimants.

But the loudest cry of “Fraud!” came from PEP whose members were holding on to traditional plans and are some of the 34,000 remaining plan holders of PPI. The 400,000 plan holders with fixed value plans were transferred to Lifetime.

The whole exercise of dealing with the traditional plans started out well. When Dee approached SEC way back in March 2004 to ask permission to spin off the pension and memorial plans, Bautista told NEWSBREAK they approved it because the proposal made sense. “Separating the products into two companies would allow the chance for the memorial and pension products to be saved [from going down together with the problematic educational plans.]”

The spin-off is actually ideal for all pre-need companies because the lines between one product and the next is clear, and the tendency to mix resources will be minimized, thus making it easier to determine if each product can stand on its own. “Anyway, the proposal then was for Lifetime to be a wholly-owned subsidiary of Pacific, so the earnings of Lifetime would still accrue to Pacific,” Bautista said.

More Scrutiny

But after the March 2004 approval by SEC, Bautista thinks that perhaps PPI eventually saw that the educational plans—both the traditional and fixed value—would both go down if left alone. As an indication, in 2004, the trust funds for the educational plans were insufficient by at least P300 million to meet the ARL level. Thus, the excess in the trust funds of pension and memorial products were used to fill the gap. By December 2004, the shareholders deposited P1.5 billion in PPI’s trust funds, thus the almost P1 billion excess in the trust funds of PPI after the spin-off.

From July 2004 to January 2005, PPI was able to spin off all the fixed value products (pension, memorial, and the fixed-value education) into Lifetime, then conveyed its shares to GPL Holdings, which eventually offloaded the Lifetime shares to Exemplar Holdings, which is partly owned by Memnon Corp. All these companies are owned, one way or another, by the Yuchengcos. In other words, a corporate veil was drawn between Lifetime Plans and PPI, with the plan holders from PPI unable to benefit from the earnings of Lifetime—but GPL Holdings would.

While SEC and the parents’ coalition, after having scrutinized the financials of PPI, both insist that PPI is not illiquid now and was not so in the past, and thus has no justification for going to court, Ernesto Garcia, PPI president, told a Senate hearing that their illiquidity would manifest itself in the coming years. Tuition payments, according to data shown by Garcia, will peak this school year and the next.

However, it seems that PPI’s moves have made things more complicated for the company. For one, it has been in an adversarial relationship with SEC and its clients. And PPI opened itself up to more intense scrutiny.

For example, SEC found out about Lifetime’s failure to submit documentary requirements (such as proof of receivables already collected and titles of cars transferred from PPI to Lifetime) that would complete the registration process of Lifetime. SEC eventually revoked Lifetime’s registration.

Sharing the Pain

CAP and PPI provide examples of what roads the other pre-need companies also offering traditional plans will take and adopt. In fact, three months after PPI went to court, another pre-need company, Platinum Plans Inc., went the same way. In the first week of July, it sought and got court intervention to postpone the payment of tuition obligations to its more than 37,000 plan holders. It had a trust fund deficit of about P100 million.

In a country where the savings rate is low (less than 20 percent) and most of the people are not sophisticated investors, pre-need products have become an essential retail financial instrument designed as forced savings for the long term. In fact, the industry’s total assets are worth more than the assets of life insurance companies, and twice as much as the assets in common trust funds, Roberto de Ocampo, president of Asian Institute of Management, said at a recent forum.

“Despite the credibility issues that are crippling the industry, there should be a sober view,” says Jesus Hofileña, president of Philam Plans, another pre-need company. Only 21 percent of the over five million plan holders have bought traditional educational plans. There are other companies that remain financially healthy. Hofileña cites Philam Plans, which did not offer traditional plans from the start, thus was spared from the burden that CAP, PPI, and Platinum now face.

What to do? Industry players often talk of pain sharing—that the company and the plan holders both take a cut in their profits and benefits, respectively. The experience of PPI is instructive. PPI’s “solution” is to offer to pay seven-percent interest from the time the plan was fully paid until availment. But this was not welcomed by the parents, who insist that PPI must settle the present value of what they are entitled to receive in the future.

The July 20 meeting between the PEP and PPI was a breakthrough since both let go of their defensive stances and moved toward co-authoring a settlement. “We both realized it takes two to tango,” says Garcia.

To share the pain, the two have found a middle ground: to use the current cost of tuition as the basis for computing the benefits of all planholders. PPI has also agreed to consolidate Lifetime’s assets back to PPI.

The work of threshing out the details, especially on what schedule to adopt in converting the Napocor bonds to cash, plus the effort of convincing all the other planholders who are not PEP members to accede to the same formula, will keep both PEP and PPI busy in the next days.

 
At Tuesday, August 02, 2005 4:29:00 PM, Anonymous pikachu said...

There will be a Congressional Hearing on PPI tomorrow at 9:30 a.m. Conference room 11, Ramon Mitra Jr Bldg., House of Representatives. For details on what shall transpire, go check out the website of the coalition. Log on to pepcoalition.com or pepcoalition.net or pepcoalition.org. whichever you wish to type as address will lead you to the PEP Coalitions new website.

 
At Tuesday, August 02, 2005 6:07:00 PM, Anonymous Anonymous said...

The Philippine Star 08/02/2005

Filipinos are forgiving, loyal and resilient. And this might be what’s preventing them from moving forward, United States Embassy Chargé d’Affaires Joseph Mussomeli indicated yesterday.

"Filipinos are a very happy and content people. But there should be some rational basis for it. People are too tolerant, too long-suffering sometimes. And so I think these three virtues have impeded the progress of the Philippines," he told the Foreign Correspondents Association of the Philippines (FOCAP) at the Manila Hotel.

Mussomeli called on Filipinos to rethink these "virtues" in the next 20 years for the country to fulfill its potential. "Such a great potential, such great people," he said of the Philippines. "There is no reason to be falling behind the rest of Asia."

The outspoken Mussomeli, who was appointed to be the next US ambassador to Cambodia, said during his "farewell forum" that the government should seriously implement reforms to bring about progress.

He said that because Filipinos are too forgiving, erring government leaders and officials never learn their lessons because nobody is ever really punished or put in jail for a long time.

"I think that the Filipino culture and society is a victim of its own virtue, that its strong sense of forgiveness — which is obviously a virtue — can sometimes prevent accountability and responsibility that any civil and modern society needs," Mussomeli said.

He pointed out that "people were never held to account, (going) back to (the late dictator Ferdinand) Marcos. No one with any power or money seems to ever be put in jail for long. I think it is a good thing to be forgiving and certainly the alternative is far worse. But there needs to be accountability. Nobody ever learned a lesson because nobody is really punished in the long run."

Mussomeli stopped short of saying that erring Philippine government officials can get away with the crimes they commit.

Most of the plunder charges filed against Marcos, his family and cronies have failed to result in convictions, a fact that could encourage the further commission of crimes by those in government.

The top US official in the country stressed that loyalty to family and friends is another virtue that prevents Filipinos from upholding justice and the rule of law.

"Loyalty needs to be more than just for family and friends. But it is a strong impulse in many cultures, including the Philippines. Loyalty to family comes first before anything, including country," he said.

Mussomeli cited a personal experience involving his neighbor’s son, who threw stones at his official residence in Makati City and threatened to kill him.

"The neighbors were very nice people and they were very embarrassed by what their son did. But their first impulse was to protect their child and they never thought that (taking) him to account in a court of law was really an acceptable possibility," he said.

Mussomeli observed that most Filipinos would first seek to protect members of their families rather than concerning themselves with the rule of law or justice "because you always take care of the people you love and that is a real detriment to modern society."

He also said the Filipino virtue of "resilience," wherein individuals quickly recover from setbacks, makes people easily forget the cause of their suffering instead of rectifying past mistakes. — Pia Lee-Brago

 
At Wednesday, August 03, 2005 9:11:00 AM, Blogger PopsJ said...

Ang ASTIG ng website ng PEP COALITION. Kudos to All, especially committee heads and trustees.

I hope the web administrator include this blog as link, the PCIJ blog, and other good governance wsites.

 
At Wednesday, August 03, 2005 6:56:00 PM, Anonymous Anonymous said...

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.

 
At Thursday, August 04, 2005 11:23:00 PM, Anonymous Anonymous said...

Anonymous said...
Plan-holder Manifesto-
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.
Wednesday, August 03, 2005 6:56:36 PM
Very well written comment and suggestion, hope to hear more from other plan-holders. It seems that there is news blackout on what’s going on the supposed PPI settlement. Do we all get to vote on what will be the final settlement before things are signed and delivered?
…mighty mike

 
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