The return of a market favorite (C&P Homes)

The return of a market favorite

By Emeterio Sd Perez
Section Editor

THE stockholders of C&P Homes Inc.-3,314 as of December 31,2004 owning outstanding common shares of 4,796,071,922-may finally see a glimpse of hope in the recovery of the company which, many years ago, was among the market's favorites.

Their bullishness may have stemmed from the fact that the company owned by the Aguilar family owns a huge landbank with market value that had gone up to over P11 billion today. The property is spread in the Calabarzon area, Antipolo and Teresa in Rizal and Bulacan.

With such fundamental-huge landbank-that makes a property company attractive to investors, most of the individuals among the over 3,000 stockholders have kept their shares since 1995, when C&P Homes sold shares through an initial public offering. They have long been hoping for a miracle to happen.

The much-anticipated miracle did not happen. Instead, the majority owners came to their rescue by saving C&P Homes from further fall.

Late last year, C&P Homes underwent a complicated corporate process in order to return to financial health. But the process has been paying off as far as the surge in the company's share price is concerned.

From a low of P0.12 in 2003, C&P Homes shares have hit a high of P2.34.

Finally, C&P Homes is back. All it took to restore market interest is a corporate act by its controlling stockholders who have proven that they, not outsiders appointed by a court, can successfully rehabilitate their company.

Instead of going to court and asking that the C&P Homes be placed under receivership, Fine Properties, Adelfa Properties and Brittany Corp. decided to convert their advances in the company into shares of stock. The process is called debt-to-equity swap.

Fine Properties own the equivalent of 60.026 percent of C&P Homes outstanding shares; Brittany , 9.63 percent; and Adelfa Properties, 1.031 percent.

Without court intervention, C&P Homes implemented a quasi-reorganization, a corporate act which involves reducing the company's authorized capital stock from P5 billion to P500 million. It then increased the latter-P500 million-to P7 billion at par value of P1.

Under a quasi-reorganization, the amount resulting from the reduction is applied to the deficit of P9.502 billion C&P Homes had piled up over the years.

Deficit refers to accumulated losses of a company. In contrast, a profitable company accumulates what is defined in the financial statement as retained earnings.

After the reduction, C&P Homes increased its authorized capital from P500 million to P7 billion to accommodate the debt-to-equity swap. Fine Properties got 2,516,596,308 shares at P1 per share; Adelfa Properties, 995,852,683 shares; and Brittany , 169,462,650 shares.

The information on C&P Homes' rehabilitation is contained in various disclosures the property company submitted to the Securities and Exchange Commission and the Philippine Stock Exchange.

Among these filings was the issuance of P3-billion long-term commercial papers approved by the SEC in 1996 to C&P Homes. These LTCPs were held by Fine Properties, Adelfa Properties and Brittany, which-unable to collect-exchanged them for shares in C&P Homes.

Completing the internal rehabilitation process was the application of additional paid-in capital to wipe out C&P Homes' deficits.

The additional paid-in of P4,834,618,966 and the reduction surplus of P4,316,464,737-totaling P9,151,083,703 effectively reduced the company's P9,530,517,614 deficit to P379,433,911.

The reduction surplus did not come from the reduction in authorized capital but from the reduction in the subscribed and paid-up capital.

C&P Homes had paid-up shares of 4,796,071,929, which decreased to 4,316,464,737 by subtracting from it 479,607,192, representing the corresponding number of paid-up shares-4,796,071,929 divided by 10 because the authorized capital stock was reduced 10 times-in the capital stock of P500 million.

Additional paid-in capital represents the premium over par value paid by stockholders for additional share issuances. This-along with reduction surplus, retained earnings or deficits-is included in a company's financial reports defined as stockholders' equity.

The quasi-reorganization appeared to have given C&P Homes a big lift in the market. Historical prices showed the company's shares hit is lowest at P0.12 in the first quarter of 2003 and P0.15 in the same quarter in 2004.

Late last year, PSE suspended the trading on C&P shares pending completion of the capital restructuring. When trading resumed on December 14, its share price opened at P2.28 and closed at its high of P2.34. It closed Thursday at P1.80.