MANILA, Philippines – The Indian-led groups behind the long-idled steel company in Iligan City won a favorable decision from an arbitration court in Singapore over sums of money it was supposed to pay the city government and other creditors.
In a disclosure to the stock exchange on Friday, May 18, Philippine National Bank (PNB) said they received from the Singapore International Arbitration Center “a partial award…in favor of the Claimants, including such reliefs as payments by Respondents of a certain sum of money that may be subject to set-off against receivables from Claimants.”
“We wish to advise the Exchange that we received from the Singapore International Arbitration Center a partial award regarding the arbitration proceedings between Global Steel Philippines (SPV-AMC), Inc. and Global Ispat Holdings (SPV-AMC), Inc, and Danilo L. Concepcion and Ors,” PNB wrote.
“The Philippine National Bank, one of the Respondents, holds a 41% interest in the claim, and has already set aside the appropriate reserve provision for the same,” it stressed.
At stake is the former National Steel Corp., a manufacturing company in Iligan that was once touted as the largest in southeast Asia before financial, as well as political, challenges haunted it in the 1990’s.
In 2008, Global Steel Philippines Inc. (GSPI), which operates the steel manufacturing complex, took its creditors and liquidator to the arbitration court to stop its lenders from declaring it in payment default.
GSPI claimed that their counterparts failed to deliver clean titles of the facilities owing to unpaid real estate taxes of the then National Steel Corp. between 1999, the time when the plant closed, and September 2004, when GSPI took over the facilities.
GSPI claimed it was not able to secure loans — and keep the steel mills running — for failure to take possession of the titles to the property.
Real estate taxes
Local politics among the government officials in the host city of Iligan played a role in the dispute over the real estate tax payments, which was what set off the arbitration case.
How much real estate tax to pay was the main issue.
Some members of the Iligan local government wanted the Indian owners, if not the creditors and liquidators of the firm, to pay as much as P3 billion, representing all unpaid taxes even before the Indian operators came into the picture.
However, the city government has also previously accepted a P133 million payment from the Indian groups, who eventually asserted they don’t owe more than that.
As a result, court cases between and among the city government, the creditors, the liquidators (led by lawyer Danilo Concepcion), the creditors like PNB, and the Indian operators ensued.
Meantime, the manufacturing plant stayed idle, missing opportunities to revive it again and take advantage of the spikes in demand in both local and export markets.
National Steel Corp. was once the Philippines’ pride. During the Marcos years, it was designed to be a key component in the country’s industrialization and was strategically located in Iligan City in Northern Mindanao so it has access to cheap power (Iligan is host to the hydro-powered Agus plants) and could readily ship out finished products through the northern Mindanao ports.
It was placed under the Office of the Liquidator from 2000 to 2004 after it was saddled by debts, caused largely by mismanagement, as well as the Asian financial crisis in the 90’s.
Several options were considered, and many buyers, including a Malaysian group, had eyed it.
Amid a contest between two of Indian’s well-known (and feuding) brothers, the Arroyo government decided to award it to the group of Pramod Mittal.
Pramod Mittal is the younger brother of Lakshmi Mittal, one of the world’s richest and the owner of ArcelorMittal, the world’s biggest steelmaker.
The award to Pramod’s group was sealed in 2004, around the time former President Gloria Macapagal Arroyo won her 2nd term in office.
The assets (and liabilities) were acquired by Global Steel Holdings, Ltd. [GSHL] of Pramod Mittal’s Ispat Group, which was initially known as as Global Steelworks Infrastucture Inc. [GSII]. It was then registered in the Securities and Exchange Commission (SEC) on October 2005 as Global Steel Philippines [SPV-AMC], Inc.
The Indian group’s funds eventually dried up and persistent promise to bring in a partner with deep pockets did not materialize. – Rappler.com