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APC to undergo restructuring

Holding firm APC Group Inc.—long speculated to be the SM group’s future vehicle for
energy assets—has approved a corporate restructuring program designed to wipe out
the company’s P7.73-billion capital deficit.

In a disclosure to the Philippine Stock Exchange, APC said it had approved an

amendment to the company’s by-laws to reduce the par value of common and preferred
shares from P1 to one centavo.

This is much more aggressive than the reduction in par value contemplated in the past,
which was meant to fast-track the elimination of its capital deficit.
In the disclosure, APC said “the reduction in par value will generate sufficient additional
paid-in capital to wipe out the company’s capital deficit.”

APC is 46.59-percent owned by leisure estate and gaming firm Belle Corp., which is
majority owned by the SM group.

By cleaning up the balance sheet, APC will be ready to accept new businesses. Pundits
have long speculated that APC would be used for the consolidation of the SM group’s
energy assets, particularly its interest in Philippine Geothermal Production Co.

SM first invested in geothermal energy in 2012 with the purchase of a 60-percent stake
in Philippine Geothermal Production Co. In December 2016, Chevron sold its
geothermal assets in the Philippines and Indonesia to a consortium that includes the
Ayala group. Recently, the Ayala group sold its 99-percent interest in ACEHI-STAR
Holdings Inc., the special purchase company that acquired Chevron’s local geothermal
assets last December, to SM group’s AllFirst Equity Holdings Inc.

On its own, APC owns Aragorn Power, which is still in pre-operating stage. In 2008,
Aragorn Power was granted a geothermal service contract (GSC) by the Department of
Energy (DOE) for a site in Kalinga province. The GSC was converted into a geothermal
renewable energy service contract (GRESC) in 2010 so the project could avail itself of
the incentives provided under the Renewable Energy Act of 2008.

As of March 31, 2017, the consent of nine out of 11 ancestral domains has been
secured covering 85 percent of the geothermal service contract area.

In November 2010, Aragorn Power and partner Guidance Management Corp. (GMC)
formed a partnership with Chevron Kalinga Ltd., a wholly-owned subsidiary of Chevron
Geothermal Philippines Holdings Inc., for the development of the geothermal area. The
parties signed a farm-out agreement that gave Aragorn Power and GMC the option to
take an equity position of up to 40 percent in the geothermal project. The parties also
signed a joint operating agreement.
Under the agreement, Chevron will be responsible for the exploration, development and
operation of the steam field and power activities. The effectivity of the two agreements
hinges on the approval by the government of the application for a Financial and
Technical Assistance Agreement (FTAA).

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Singapore Enacts New Corporate Bankruptcy Law to Promote International Debt

April 2017

On March 10, 2017, Singapore's Parliament approved the Companies (Amendment) Bill
2017 ("Act") to enhance the country's corporate debt restructuring framework.
The Act was assented to by President Tony Tan Keng Yam on March 29, 2017, and is
expected to become effective later this year.

The Act is a ground-breaking development in Singapore's corporate rescue laws and

includes major changes to the rules governing schemes of arrangement, judicial
management, and cross-border insolvency. The Act also incorporates several features
of chapter 11 of the U.S. Bankruptcy Code, including super-priority rescue financing,
cram-down powers, and prepackaged restructuring plans. The legislation may portend
Singapore's emergence as a center for international debt restructuring. Its enactment
was the initial phase in a series of law reforms intended to implement recommendations
made by the Insolvency Law Review Committee and the Committee to Strengthen
Singapore as an International Centre for Debt Restructuring.

Key Provisions of the Act

Easier Access to Judicial Management. Singapore's judicial management procedure

is similar to the administration regimes enacted in the U.K. and Australia, which provide
for the appointment of an independent manager to operate and run the company
instead of a liquidator to wind it up. In Singapore, a judicial manager's mandates are
rescuing the company, obtaining approval of a scheme of arrangement, and achieving a
more advantageous realization of the company's assets than what would be realized in
a winding-up proceeding.

The Act makes it easier for companies (other than certain excluded entities, such as
banks) or creditors to obtain a judicial management order by lowering the threshold
requirements for court approval. Previously, a company could apply for a judicial
management order if it "is or will be" unable to pay its debts. Under the Act, the
standard is modified to require that the company "is or is likely to become" unable to
pay its debts. In addition, under previous law, a party with the ability to appoint a
receiver for the company had the absolute power to prevent the appointment of a
judicial manager. The Act now obligates any such party to demonstrate that the
appointment of a judicial administrator would cause disproportionately greater prejudice
than the prejudice to unsecured creditors if judicial management were denied.

Schemes of Arrangement. The Act modifies the rules and procedures governing
schemes of arrangement proposed by a judicial manager of a debtor-company pursuant
to section 210 of the Singapore Companies Act ("CA") to incorporate many of the
features of chapter 11, including super-priority debtor-in-possession financing, a "world-
wide" moratorium on debt collection efforts akin to the U.S. Bankruptcy Code's
automatic stay, a mechanism permitting approval of nonconsensual ("cram-down")
schemes of arrangement and procedures for court approval of prepackaged schemes.

Similar to "debtor-in-possession" financing under section 364 of the U.S. Bankruptcy

Code, the Act introduces rescue financing provisions for schemes of arrangement. The
court may, under certain conditions, including the unavailability of credit on less
favorable terms and adequate protection of the interests of existing secured creditors,
authorize the debtor to incur priority unsecured, secured, or super-priority secured
financing, provided such financing is deemed necessary to enable the debtor to
continue as a going concern. The rescue financing provisions do not preclude a debtor
from obtaining secured or unsecured financing or credit in the ordinary course of

The Act introduces provisions authorizing the court to approve a scheme of

arrangement over the objection of a class of dissenting creditors, provided: (i) creditors
representing a majority in number and holding at least 75 percent in value of the claims
in a class for which votes are actually cast vote in favor of a proposed scheme; (ii)
creditors representing a majority in number and holding at least 75 percent in value of
the total claims against the debtor for which votes are actually cast vote in favor of a
proposed scheme; and (iii) the court is satisfied that the scheme is "fair and equitable"
to dissenting creditors and does not "discriminate unfairly" between two or more classes
of creditors. The Act provides guidance as to the meaning of "fair and equitable"
(including the requirement that a dissenting creditor must receive at least as much
under a scheme of arrangement as it would receive were the scheme not approved). It
does not explain unfair discrimination. Both concepts, however, are based upon the
cram-down provisions set forth in section 1129(b) of the U.S. Bankruptcy Code, for
which there is a wealth of interpretive jurisprudence that can offer guidance as to their
meaning and application.

The Act includes procedures to govern prepackaged schemes of arrangement, but only
in cases involving consensual, as distinguished from cram-down, schemes. The court
may approve a scheme of arrangement without any meeting of creditors if, among other
things: (i) the debtor-company has provided creditors with a statement, accompanied by
adequate information, explaining the effects of the scheme, the impact of the scheme
on any material interest of the directors or indenture trustees and the effect of the
scheme on such interests; (ii) notice of the application seeking approval of the scheme
is provided to every affected creditor and properly published; and (iii) the court is
satisfied that, had a meeting of creditors been convened, the scheme would have been
approved by the required majorities at the meeting.

Enhanced Moratoriums. The Act introduces a series of "enhanced moratorium"

provisions to augment the limited moratorium provisions contained in section 210(10) of
the CA. Upon application of the debtor or a creditor and notice to, among others, each
known creditor to be bound, the court may order a moratorium, provided the debtor has
filed an application for court authority to call a meeting of creditors or represents that it
intends to do so as soon as practicable. The application must be supported by evidence
that a proposed compromise or arrangement is supported by: (i) affected creditors
holding not less than one-third in value of claims against the debtor; or (ii) creditors
whose support for the proposed compromise or arrangement is important for its
prospects for successful implementation.

A moratorium order may be entered by the court to preclude, among other things: (i)
commencement or continuation of proceedings against the company or its assets; (ii)
appointment of a receiver or manager; (iii) repossession of goods under leases, hire
purchases, or retention of title arrangements; (iv) re-entry or forfeiture under any lease;
or (v) winding up of the company. The moratorium can apply extraterritorially, provided
the court has jurisdiction over affected creditors or their assets. A moratorium order may
be extended to include a debtor-company's domestic and foreign subsidiaries as well as
holding companies if they play a "necessary and integral role" in the debtor's scheme of
arrangement. Certain financial market transactions (e.g., certain set-off and netting
arrangements) are also excluded from the scope of the moratorium.

Upon the filing of an application for a moratorium order, an automatic 30-day interim
moratorium comes into effect with respect to creditor collection actions in Singapore.
The automatic moratorium is available only once in a 12-month period to prevent abuse
through repeated filings.

If the court grants a moratorium order, the Act provides that the debtor-company must
provide certain financial information to creditors to allow them to assess the feasibility of
a proposed scheme. A creditor may seek an order of the court modifying the scope of a
moratorium order. A creditor may also apply to the court during the pendency of the
moratorium for an order preventing the company from: (i) disposing of assets other than
in good faith and inside the ordinary course of business; (ii) engaging in conduct in the
ordinary course of business that materially prejudices creditors or significantly
diminishes the company's assets; or (iii) changing the composition of the debtor-
company's shareholders or members.

Claims Resolution Procedures. The Act establishes procedures governing the

submission, objection to, and adjudication of creditor claims. The provisions include: (i)
procedures for the filing of proof of creditor debts; (ii) permitting creditors who have filed
proof of their debts to inspect and object to claims filed by other creditors; (iii) the
appointment of an adjudicator nominated by the company to adjudicate the validity of
every proof of debt; and (iv) the adjudication of disputes relating to claims by an
independent assessor agreed to by the parties or appointed by the court following the
application of a party to the dispute.

Cross-Border Insolvencies. Under previous law, only a company incorporated under

Singapore law could apply for judicial management proceedings. The Act provides that
"any corporation liable to be wound up under this Act" may apply for judicial
management and expands the scope of the "liable to be wound up" test to include
foreign companies with a "substantial connection" to Singapore because, among other
things, a company: (i) has its centre of main interests in Singapore; (ii) carries on
business in Singapore or has a place of business there; (iii) has substantial assets in
Singapore; or (iv) has a Singapore choice of law provision or forum selection clause in a
loan agreement or contract.

The Act formally adopts the UNCITRAL Model Law on Cross-Border Insolvency, a
framework of rules and procedures governing cross-border bankruptcy and insolvency
cases that has now been enacted in 42 countries. Its implementation is expected to
make it significantly easier for foreign companies subject to bankruptcy or insolvency
proceedings in other countries that have assets or operations in Singapore to obtain the
assistance and cooperation of Singapore courts in administering their assets.

The Act abolishes the "ring-fencing rule," whereby the Singapore liquidator of a foreign
company with assets in Singapore was obligated to pay the claims of local creditors
before any of the debtor's assets could be turned over to be administered in the debtor's
foreign bankruptcy or insolvency proceeding.