MANILA - The Philippine Stock Exchange will suspend the trading of Benguet Corp's shares for one month due to the Romualdez-controlled mining firm’s failure to observe disclosure rules.

In a memorandum issued on Tuesday, PSE president Francis Lim said the one month suspension will start on Tuesday October 27.

Share price of the country's oldest miner closed at P12, down 12.7% from last Monday's close of P13.75.

PSE said Benguet reportedly failed to disclose that it has received at least 3 notices of default from creditors for failing to pay a loan with a P1.2 billion balance.

A notice of default is a formal warning sent by a lender to a borrower who is in default of the terms of a loan. The filing of a notice of default is the initial step in the legal process of foreclosure.

A default notice is considered material information that the PSE said should be disclosed to the investing public so they can make informed decisions about their Benguet shareholdings.

Earlier, Benguet has disclosed that it is disputing the status of the creditor entities, which assumed the unpaid loans from Benguet’s creditor banks.

However, Lim said "The exchange is not taking any positions on these matters."

Trading suspension

Under the Revised Disclosure Rules of the PSE, a listed company that violated the disclosure requirements for the third time within a 12-month period will be penalized with one month trading suspension.

The fourth violation is already a ground for delisting.

According to PSE, Benguet failed to disclose to investors the notices of default, which were received on the following dates:

- March 4, 2009. The notice, dated February 23, was issued by PNB Trust Banking Group, the Trustee under the Mortgage Trust Indenture, for Benguet’s failure to pay its loan obligations with Tranche 1 (SPV-AMC), Inc.

- July 1, 2009. The notice was again issued by PNB, the MTI Trustee, for Benguet’s failure to pay its loan obligations with Investment 2234 Philippines Fund 1 (SPV-AMC).

- Various dates. Letters from PNB regarding the notices of default from the following additional creditors: Calyon Credit Agricole CIB, Philippine Distressed Asset Asia Pacific (SPV-AMC) 1, Inc., Bank of America, Marathon Master Fund, Ltd., and Asset Pool A (SPV-AMC) 1, Inc.

The PSE has also requested from Benguet more details regarding the Restructuring Agreement and the Mortgate Trust Indenture (an agreement that enables firms to entrust a mortgage and create mortgage participation to various creditors).

The PSE wrote Benguet at least 4 times. The letters were dated April 24, May 6, May 20, and July 21, 2009.

Last April, the exchange halted the trading of Benguet shares for an hour.

The exchange, however, noted the Benguet has notified the exchange that it is contesting the status of the special purpose vehicle (SPV) companies as transferee creditors.

Benguet has cited that the transfer of the loans from creditors to the SPV companies was not done in accordance with the Republic Act 9182, or the Special Purpose Vehicle Act. The mining firm added that the declaration of default was not done in accordance with the pertinent provisions of MTI and Restructuring Agreement.

Unpaid loans

Benguet obtained the P4.2 billion-worth of dollar and peso denominated loans in the 80’s to finance the development of its Antamok Gold project in Itogon, Benguet Province.

However, the project was discontinued as the price of gold plummeted.

Benguet claimed that, from 1993 to 2000, it paid down P3.3 billion of the loan principal and about P1.1 billion in interest charges.

The sharp peso devaluation, however, bloated the remaining balance to about P1.2 billion. The loan balance is secured by an MTI.

Benguet has said it is taking steps to resolve matters with its creditors.