Bulacan—(PHStocks)— Vitarich Corp. (PSE: VITA), a pioneer in the Philippine feeds and agri-business industry, filed a material disclosure with the Philippine Stock Exchange (PSE) announcing that it had reached an agreement to convert a major part of its debt to common equity. This debt conversion will be the first step in a process that will lead to a complete and successful rehabilitation of the company.
Vitarich is one of several local and regional companies that suffered severe losses from the global financial crisis that began in 1997. As noted in the Rehabilitation Receiver’s Report dated January 4, 2011, Vitarich was in financial difficulty, not because of poor management, but because of the Asian financial crisis of the late 1990s.
The notes to the financial statements for 1997 and 1998 reflect the effects of that same crisis, which produced a cloud of uncertainty over the company. Market conditions imposed a severe financial burden, as interest rates rose to a high of 35% in 1997. Meanwhile, the Philippine peso fell from PhP26.30 to $1.00 in early 1997 to a low of PhP56.3 per $1.00 in 2004, affecting the cost of imported components of the company’s animal feeds.
The Rehabilitation Receiver noted that Vitarich, prior to filing for rehabilitation (through asset sales), paid substantial amounts to its secured creditors. Lacking sufficient working capital to support sales and service debt, Vitarich filed for court-supervised rehabilitation on September 15, 2006.
The conversion of previously incurred debt in the sum of PhP2,376,528,137.00 into equity of the corporation shall immediately wipe out a substantial portion of Vitarich’s debt. The debt-equity conversion looks to immediately make the corporation competitive. This is therefore a significant step for the successful rehabilitation of the corporation and is good news not only for the corporation but for all its stakeholders i.e. the employees, the other creditors, the suppliers and business partners, the customers, and the public in general.
Ricardo Sarmiento, Chief Operating Officer and Executive Vice-President for Vitarich, stated, “The Vitarich Board of Directors has made every effort to address the problems concerning the Company’s stability since the Asian financial crisis hit, and we believe this planned conversion of debt to equity is a big step towards our successful corporate rehabilitation. We at Vitarich want to reassure the public that the uncertainty some have viewed as surrounding our business will no longer be an issue moving forward.”
As a provider of feeds to the agri-business since 1950, Vitarich is a major link in the Philippines’ farm-to-consumer supply chain. The company is in the business of formulation, production, storage, and marketing of various animal and aqua feeds, which are produced in various forms. With the filing of this material disclosure and the subsequent debt-equity swap, Vitarich aims to once again regain its status as a leader and innovator in its industry.