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Subic Bay Metropolitan Authority (MPD-SBMA)

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03 July 2009

Legenda continues to defy Subic authorities

The operator of a hotel chain here has defied orders of the Subic Bay Metropolitan Authority (SBMA) to stop its operations and vacate its leased properties, claiming the free-port authority has no legal or factual basis to terminate its lease.

The Legend International Resorts Limited (LIRL), which operates the Legenda Resort Hotel and Casino, said in a statement that it continues to operate because it has both the right to do business and the right to remain in its leased premises.

Recently, the SBMA said it canceled the LIRL’s certificate of registration and tax exemption (CRTE) and permit to operate (PTO), and terminated the firm’s lease agreement after the company failed to pay its debt amounting to more than P850 million.

With its registration and permits voided, “LIRL ceased to become a duly registered Subic Bay Free-Port Zone locator, and its rights and privileges to operate a business, likewise, ceased to exist,” said SBMA Administrator Armand Arreza.

However, LIRL maintained it has the right to continue operating in Subic even after the SBMA issued a cease-and-desist order (CDO) on June 9.

When the SBMA blocked the main entrance to Legenda Hotel and closed its service bay over the weekend, LIRL responded by urging guests to use Legenda’s side entrance.

In a statement to the public, LIRL pointed out that its CRTE, which SBMA has voided as of May 22, “is a property right [that] cannot be canceled without due process of law.”

“SBMA’s cancellation thereof is without any legal or factual basis,” the LIRL said, adding it has thus appealed SBMA’s action with the office of President Arroyo.

Aside from insisting on its right to conduct business here, LIRL also said it has the right to remain in the premises because the amounts being claimed by the SBMA “represent unsubstantiated and unverified arrears,” and that the authority “continues to accept our rental payments.”

The LIRL also pointed out that SBMA’s claim of preference “is against a Hong Kong company, which is subject to Hong Kong laws on liquidation.”

“Hong Kong laws would determine matters concerning LIRL and its obligations,” the defiant Subic investor also said in the statement.

As this developed, the SBMA clarified that the LIRL is indeed a Hong Kong-registered firm that “apparently [does] business not in Hong Kong, but principally in [the Subic Bay Free Port].”

It added that LIRL’s majority shareholder, with a 59.99 percent stake, is Metroplex Berhad, a company listed on the Malaysian Stock Exchange.

According to the SBMA, Metroplex has lease agreements with the SBMA over the main Legenda facility, as well as several estates in Subic that include some properties the firm had given up recently.

As to why the SBMA is seeking to repossess properties now occupied by LIRL, it said the Malaysian-owned firm “owes SBMA unpaid rentals and casino share since 2004” that now total P850.17 million.

The SBMA said after the LIRL experienced financial difficulties, the firm filed a debtor-initiated petition for corporate rehabilitation on November 5, 2004, with the Regional Trial court in Olongapo City, leading the same court to issue a stay order that barred the SBMA from collecting on its claims from the beleaguered firm.

It added that following a creditor-initiated petition for rehabilitation on October 13, 2006, the court finally approved a rehabilitation plan that was premised on, among others, “reestablishing gaming operations, as well as the continuation of the existing hospitality business.”

However, the SBMA said two years after the LIRL rehabilitation plan was approved, it noted that “the said plan was going nowhere.”

Thus, on October 9, 2008, the SBMA filed a motion to terminate the rehabilitation proceedings, arguing that the LIRL had failed to get a casino license, and that it had given up its leases on other hotels and entertainment facilities that were an integral part of the firm’s hospitality business.

On February 9, the court granted the SBMA’s motion to dismiss the rehabilitation case and lift the stay order that the court has issued earlier, thus leading LIRL’s institutional financial creditors to seek the issuance of temporary restraining order (TRO) against the SBMA.

However, the three different divisions of the Court of Appeals with whom the petitions were filed had not issued any TRO or writ of preliminary injunction, the SBMA said.

In the absence of any TRO or injunction, the SBMA said it sent LIRL on February 12 a notice of default on the lease of Legenda Suites, a hotel complex in Subic’s Cubi Point, and a notice of termination on the lease on the Legenda Hotel, which is located across the road from the SBMA’s main office building.

The SBMA said it sent the notices of default and demand letters to LIRL “in order to protect the interests of the government and collect the huge unpaid rentals and casino share of LIRL.”

On April 15, the SBMA was able to repossess the Legenda Suites, using a provision in the lease agreement that in case of default, it may “immediately reenter, renovate , or relet all or part of the property and cancel all rights and privileges granted to tenants.” (Henry EmpeƱo, Business Mirror Online)

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