Read Part 1: Manila Hotel gets facelift but glitter gone
(Second of a series)
MANILA, Philippines?Billionaire Emilio T. Yap may have to surrender over three-fourths of his wealth to pay off unpaid loans of P189 million incurred by Manila Hotel that have ballooned to a mind-boggling P17 billion under his watch.
The loans were extended by the Government Service Insurance System to the hotel that the GSIS had owned and managed as a separate corporation and before ownership changed hands.
Since last year, Estrella Elamparo, GSIS chief legal counsel, has been pushing to take Yap to court, but her boss, Winston Garcia, general manager of the state pension fund, wasn?t about ready to tangle with one of the country?s leading tycoons.
?We have a strong case, we are hoping to file it this year,? Elamparo said in an interview with the Philippine Daily Inquirer (parent company of INQUIRER.net).
One stumbling block is the enormous filing fee, Elamparo said. ?If we decide to file a case, we will need P360 million. That?s substantial; it?s more than double the principal amount.?
The GSIS has filed a petition with the Supreme Court for exemption from filing of court fees of government entities in 2007 and expects to have a favorable decision soon.
Billing in last 10 years
While the pension fund has not wavered in sending its billing statements in the last 10 years, Yap, who also owns the Manila Bulletin newspaper, has been equally unwavering in his position that the loans were for the GSIS and not his to pay.
?They have been saying that it?s not their fault. They have cited stipulations to the sale that the buyer is not obliged to recognize unrecorded liabilities. But the loans are not disputable, it has been used by the hotel, so the owners must pay,? Elamparo said.
The 82-year-old Yap, who is ranked by Forbes magazine as the Philippines? 12th richest with a net worth of over $420 million, has refused to honor the P189 million in loans extended by GSIS from 1995 to 1996 to Manila Hotel.
This was before Yap?s Manila Prince Hotel Corp. (MPHC) took over on May 7, 1997.
Interest and penalties
Elamparo claimed that based on the GSIS? latest computations, the loan amount and penalties had ballooned to P17.5 billion.
The GSIS said that the total amount due represented P182.843 million in unpaid principal payments, interest on the principal at P797.874 million, a per contract interest of 3 percent of P13.412 billion and surcharges of P3.081 billion.
The unpaid loans, which were used for the renovation and upgrading of Manila Hotel and payment of employees? back wages, are on top of the rent that GSIS claimed Yap has not been paying since he took over Manila Hotel.
Yap has argued that MPHC did not borrow from the GSIS and thus would not pay.
But Elamparo said that the loans were specifically granted to Manila Hotel and not its individual stockholders.
?There was no change in personality when they bought into the corporation, it is still Manila Hotel where they are the new owners and they have to assume all the liabilities,? she said.
GSIS dared: File case
Former Sen. Jose Lina Jr., Manila Hotel president, is adamant that MPHC did not receive a single centavo of loan from the GSIS before or after it took over the hotel.
In interviews with Inquirer reporters, Lina said that this had been a recurring issue rehashed in newspapers over the years.
?If they have a strong case against us, why won?t they file it? It has been there all along, why haven?t they filed any case against us?? asked Lina, who reckoned that the legal brief presented by its lawyers years ago remained valid up to now.
Yap had a legal eagle to defend his case against GSIS claims more than a decade ago?the recently retired Supreme Court Associate Justice Adolfo S. Azcuna who was MPHC president when control of Manila Hotel passed from the GSIS to Yap.
Azcuna argued that when the GSIS issued bidding guidelines on Manila Hotel Corp. (MPC) four months before it was auctioned in September 1995, the company had only P28 million in obligations and none of the disputed loans in the books.
Loans in 4 tranches
The P189 million in loans?allegedly secured surreptitiously without the knowledge of the bidders, or so the current Manila Hotel management claims?were made in four tranches.
The first loan of P40 million was released in July 1995 for room renovations and facilities upgrading. In January 1996, a second loan of P60 million was taken out from the GSIS for the hotel?s early retirement program, room renovations and upgrading of equipment.
This was followed by the release of P75 million in July 1996 for facilities rehabilitation and working capital and P14 million in December 1996 to pay for the back wages of hotel employees.
All of the loans had a five-year payment term at an interest rate of 16 percent per annum and a penalty of 24 percent a year.
2-year bidding delay
But what Yap left out in his claim was that he was the cause of the two-year delay between the bidding and the change in ownership of Manila Hotel.
It was during this period that the loans were taken out while the case was pending in the Supreme Court.
Had the normal bidding procedures been duly observed, Renong Berhad, Malaysia?s most diversified conglomerate, would have been in control of Manila Hotel now because it gave the best offer of P44 per share for 51 percent of the hotel in April 1995.
But Yap, the only other bidder, did not take losing that well, convinced of the righteousness of his cause. The Chinese-Filipino businessman moved to match Renong?s bid, claiming that as a Filipino investor, it had preference over a foreigner in taking over an asset that was part of the national patrimony.
In a controversial ruling which underscored the intervention by the judiciary in what commentators said should have been a straightforward business transaction, the high court in February 1997 ruled in favor of Yap, citing the ?Filipino First? policy enshrined in the 1987 Constitution.
So, 20 months after the bidding and five months after the last of the disputed loans were released, Yap signed a check for P673.2 million and took over the keys of Manila Hotel on May 7, 1997. (Tomorrow: Emilio Yap replies)