The Grey Chronicles


Breakthrough: Special Purpose Vehicle for NSC

A breakthrough finally came in January 2002, when creditors agreed to write-down Malaysia’s $800M debt exposure in NSC. President Arroyo ordered DTI to foreclose NSC on February 2002 after she succeeded Estrada last January 2001 (The Philippine Star, 06 February 2002).

In February 2002, the shareholders of NSC planned to create a special purpose vehicle before the liquidation of its P30 billion assets or a sale of NSC through public bidding. NSC special purpose vehicle was to be incorporated with SEC as an Asset Management Co. (AMC) right after the signing of a shareholders agreement, which will convert NSC’s outstanding debt—about P 16 billion in 2002—into equity (Jao-Grey, 2002).

The Philippine government enacted the Special Purpose Asset Vehicle (SPAV or SPV) Law, R.A. 9182, in January 2003 and became effective in April the same year. The SPAV Act provided a legal framework for the establishment of SPVs on asset management companies (AMC) that will acquire the non-performing assets (NPAs) of the covered financial sector. These SPVs could then avail of fiscal incentives, such as value-added and capital gains tax exemptions, for the transfer transaction of the NPAs from Financial Institutions to SPVs, which could rehabilitate the acquired assets then could sell them off for a profit within five years (Villanueva, 2003).

Meanwhile from 2000 to 2004, NSC facilities were accounted, maintained and secured by a group of personnel dubbed as Plant Facilities Preservation (referred henceforth as PFP) team in a monthly rotating schedule, refer to Appendix BB. Under the able leadership of Engr. Ruben A. Pinaroc, this team also devised a rehabilitation plan (this researcher was the secretariat), and consolidated the plant assets through the Asset Retrieval Task Force, or ARTAF, to a designated warehouse and satellite storage areas. Only the ARTAF group remained when GSPI took over NSC facilities in 2004.

The PFP team produced a meticulously detailed Rehabilitation and Pre-Start-up Plan (NSC, 2003) for each mill from Hot Strip Mills, Cold Strip Mills and Electrolytic Tinning Line. The PFP’s plan even included the Billet Steelmaking Plant, plus all the support facilities: utilities and power distribution, engineering shops, laboratories, logistics and warehouses, administration services, including information systems, building and grounds.

Based on this rehabilitation plan, a three-stage rehabilitation proposal was presented in July 2003 to the task force headed by then Vice President Teofisto Guingona mandated by Administrative Order 45 to oversee the development of the country’s steel industry with the establishment of an integrated steel plant in Mindanao (The Philippine Star, 21 September 2003).


The Philippine Star (2005), “Advocacy group seeks closure of steel plant,” Manila: The Philippines Star, 06 February 2006. back to text

Jao-Grey, Margaret (2002). “NSC shareholders to form SPV.” Manila: The Philippine Star, 14 February 2002. back to text

Villanueva, Cesar L. (2003). Philippine Trends in Addressing Distressed Assets and Vehicles for Maximising Value. Proceedings of the Forum for Asian Insolvency Reform (FAIR): “Maximising Value of Nonperforming Assets,” Seoul, South Korea: Asian Forum, 10 – 11 November 2003. back to text

National Steel Corporation (PFP, 2003), Rehabilitation and Pre-Start-Up Plan for NSC. Iligan City: Plant Facilities Preservation, NSC, July 2003. back to text

The Philippine Star (2003), “Steel industry task force pushes for integration,” Manila: The Philippines Star, 21 September 2003. back to text


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