The Rehabilitation Court issued a Resolution dismissing the Rehabilitation

The rehabilitation court issued a resolution

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The Rehabilitation Court issued a Resolution dismissing the Rehabilitation Petition. However, this was reversed by the CA. The Court of Appeals ruled that the Rehabilitation Court erred in disregarding the opinion of Atty. Bernaldo that the Fastech Corporations "may be successfully rehabilitated." The Rehabilitation Court "failed to distinguish the difference between an adverse or negative opinion and a disclaimer or when an auditor [could not] formulate an opinion with exactitude for lack of sufficient data. Landbank questions the approval made by the CA. It argues that respondents' creditors raised valid issues that should be addressed before declaring that rehabilitation was viable. It maintains that it does not agree with the period of the repayment plan, which could take almost 20 years, or with the waiver of interest and penalties incurred prior to the filing of rehabilitation . Petitioner points out that the Rehabilitation Receiver's opinion is subjective and possibly partial in favor of rehabilitation There are also some concerns which are beyond the Rehabilitation Receiver's competence and must be directly addressed by respondents to show petitioner that they are sincere in gaining the benefits of rehabilitation and are not simply hiding behind its protective mantle to evade obligations. ISSUE: W/N the rehabilitation plan was feasible? HELD: No . The Rehabilitation Plan failed to comply with the minimum requirements , (a) material financial commitments to support the rehabilitation plan; and (b) a proper liquidation analysis. The specific characteristics of an economically feasible rehabilitation plan: a. The debtor has assets that can generate more cash if used in its daily operations than if sold. b. Liquidity issues can be addressed by a practicable business plan that will generate enough cash to sustain daily operations. c. The debtor has a definite source of financing for the proper and full implementation of a Rehabilitation Plan that is anchored on realistic assumptions and goals. On the other hand, this court enumerated the characteristics of a rehabilitation plan that is infeasible: a. the absence of a sound and workable business plan; b. baseless and unexplained assumptions, targets and goals; c. speculative capital infusion or complete lack thereof for the execution of the business plan; d. cash flow cannot sustain daily operations; and
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e. negative net worth and the assets are near full depreciation or fully depreciated. A perusal of the 2009 audited financial statements shows that respondents' cash operating position was not even enough to meet their maturing obligations. Notably, their current assets were materially lower than their current liabilities, and consisted mostly of advances to related parties in the case of Fastech Microassembly, Fastech Electronique, and Fastech Properties . Moreover, the independent auditors recognized the absence of available historical or reliable market information to support the assumptions made by the management to determine the recoverable amoun t.
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