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Pacific Plans files for rehabilitation
Posted: 1:31 AM | Apr. 14, 2005
Elizabeth L. Sanchez
Inquirer News Service
PRE-NEED firm Pacific Plans Inc. (PPI) of the Yuchengco group has filed for suspension of payments and rehabilitation with a Makati City court, saying it may not be able to pay future claims because school tuition has been increasing at a tremendous rate ever since the government removed a 10-percent cap on tuition hikes in 1990, the company said in a statement.
Pacific Plans officials said that, for the moment, the firm could still make tuition payments.
The Makati court on Wednesday issued a stay order, effectively freezing all Pacific Plans payments to creditors, suppliers, and plan holders until the company is rehabilitated.
The company also asked and was allowed to pay the current tuition of its beneficiaries.
The beneficiaries would get only tuition support. This means that in non-exclusive schools, beneficiaries will get roughly the same amount they got in their last availment, but those in exclusive schools will get much less than their last claim because their tuition is roughly double that in non-exclusive schools.
Securities and Exchange Commission Chairperson Fe Barin said the commission was still awaiting submissions from Pacific Plans.
The pre-need firm has 34,000 plan holders, with roughly 16,000 filing educational claims for school year 2005-2006.
In its rehabilitation petition filed with a Makati regional trial court last week, the company said it had P341 million in cash for the current enrollment period. It said checks would be released starting April 14.
Pacific Plans said that while its ability to pay future claims was doubtful, it could return the money paid by the plan holders, plus a net return of seven percent per year from the date the plan was fully paid.
It said this would be done by replacing their open-ended plans with fixed-value plans, which can be encashed by July 2010, when government bonds in Pacific Plans's trust funds mature.
Pacific Plans' trust fund is estimated at $50 million, consisting mostly of government bonds maturing in 2010.
Open-ended education plans refer to plans in which the company promises to pay tuition at any rate, unlike fixed-value plans.
The court petition said that every time benefits were paid to almost 16,000 "availing" plan holders, the trust fund shrank, to the prejudice of the 18,000 who would file their respective claims years later.
"The deregulation of tuition has caused a tremendous rise in the cost of education, which in turn put an enormous pressure on traditional (open-ended) plans and their respective trust funds considering that pre-need companies dealing in such securities could not pass on the additional cost to their plan holders," the company said in the petition.
Pacific Plans stopped selling open-ended plans in 1992, realizing it was a matter of time before the gap between tuition and its income affected the company the way it did now.
The SEC ordered pre-need companies to stop selling this type of education plan 10 years later for the same concerns.
Pacific Plans has appealed to plan holders who are not claiming tuition support this school year not to go to its offices, to allow smooth processing and release of checks.
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