The company is working with creditors to restructure the debt.

But the conglomerate is not about to go under, said Noel Reyes, head of research for the influential Philippine daily BusinessWorld . 'They just have to amputate some parts but it will survive.'

To save Meralco, Finance Secretary Jose Camacho last weekend quietly proposed a government takeover of its board, management and operations.

The company's response was one of surprise. 'We are shocked,' Oscar Lopez said.

Meralco officials said they would resist and Mr Camacho dropped the idea later this week.

The proposal and its quick collapse open a window on the intricate political minuet danced by the Lopez family and the government, which holds a 25 per cent stake in Meralco.

It was Benpres director Eugenio 'Gabby' Lopez, Oscar Lopez's nephew, who first approached Mr Camacho, his classmate at Harvard University, days before the November 15 ruling 'and advised him of a potential problem involving Meralco', according to government spokesman Ignacio Bunye.

'Mr Lopez sounded very urgent and Mr Camacho responded with a template proposal based on the Philippine National Bank rehabilitation plan.'

Mr Reyes noted that the Lopez family controlled Meralco even though, with a 17 per cent stake, they hold less equity than the government. 'If you act like you control, then you control,' he said.

The Meralco crisis is another painful lesson for the clan, whose late patriarch Eugenio Lopez once vowed 'never again' to mix business and politics.

Doing business in Manila continues to require political connections and the Lopezes have long had among the finest.

When President Diosdado Macapagal opposed Meralco's rate hike some 30 years ago, the clan switched allegiance to Ferdinand Marcos and fielded Fernando Lopez, Eugenio Lopez's brother, as his vice-president.

After falling out with Mr Marcos, the brothers attacked him through their broadcast station, ABS-CBN, and newspaper. Mr Marcos retaliated by jailing Eugenio Lopez. He was released in exchange for a government takeover of Meralco and ABS-CBN. When Mr Marcos fled in 1986, the Lopezes got back both assets.

Through Benpres, Eugenio Lopez chose to expand into new businesses like mall and condominium construction, telecommunications, water and toll roads.

The last three were capital-intensive, high-risk, closely regulated areas, said political science professor Alex Magno.

'In other words, [the Lopezes] preferred high-barrier areas where only the big boys play,' said Mr Magno, who now sits on the board of one of Meralco's creditors, the Development Bank of the Philippines.

'The ability to walk the corridors of power is obviously part of their strategy.'

In October 1999, the search for power led to the marriage of Manuel 'Beaver' Lopez, son of Meralco chairman and chief executive Manuel Lopez, and then-president Joseph Estrada's daughter Jacqueline.

A reversal of the government's stance the following year on a protracted accounts dispute with Meralco was cynically attributed by one analyst to the marriage.

Beaver Lopez's cousin, Federico, executive vice-president of Benpres' electricity unit First Generation Holdings, said Meralco's case showed the family firm was not 'banking on politics but on the merits of our case'.

In answer to why Meralco failed to set aside provisions in case it lost the case, he said: 'Our lawyers felt the strength of the arguments were very, very much in our favour'.

The Lopezes believe their business problems are temporary.

Federico Lopez said the family was giving itself three to 10 years to refocus on its core businesses. 'Everything else beyond that' was for sale, he said.