Piltel restructures P39.5-billion debts

All systems are go for the restructuring of the Pilipino Telephone Corp.’s (Piltel) P39.5 billion debt and the implementation of the company’s program aimed at putting the company on the road to profitability.

Piltel officials announced that the company has satisfied all the conditions necessary for the debt restructuring to be completed on a consensual basis.

Based on the agreements signed with Piltel’s various creditors, approximately P39.5 billion of Piltel’s debt obligations will be restructured upon the effectivity of its master restructuring agreement (MRA) on June 4, successfully concluding what is possibly the large corporate debt restructuring in Philippine history.

Piltel president and chief executive officer Napoleon Nazareno said this is the only debt restructuring plan that has been done on a consensual basis, without need for intervention from the Securities and Exchange Commission or the courts, and was concluded in only two and a half years.

The debt restructuring plan now has the support and participation of 98 percent of Piltel’s creditors based on principal amounts owed.

Nazareno said that while the company expects to immediately benefit from the reduction of Piltel’s interest expense from the third quarter onwards of about P400 million annually, they will continue to explore other ways of improving the company’s operations in order to direct it toward profitability.

For his part, PLDT president and CEO Manuel V. Pangilinan said that the months and years ahead will remain challenging but the successful completion of this financial restructuring will now allow Piltel to concentrate on improving its operating performance.

Last May 25, the date set out as the final deadline in the MRA, the company met the conditions for effectivity set out in the same agreement, including approval from Piltel’s shareholders of the overall terms of the debt restructuring plan and the creation of a mortgage over substantially all existing and future assets of Piltel in favor of its creditors; approval from the National Telecommunications Commission of the creation of a mortgage over Piltel’s assets; approval from the Securities and Exchange Commission of the exemption from registration and issuance of the Piltel and PLDT convertible preferred shares and the underlying PLDT common shares.

Other conditions included approval from the Bangko Sentral ng Pilipinas of the debt restructuring terms and the participation in the restructuring of Piltel creditor banks that do not have expanded commercial banking licenses or are classified as offshore banking units; approval from the Philippine Stock Exchange to list the underlying PLDT common shares to be issued in the event of conversion of the PLDT convertible preferred shares; and consent from the relevant PLDT creditors.

Details of restructuring

Under the terms of the pact, 50 percent of the Piltel’s entire debt will be restructured while the other 50 percent will be swapped with Piltel convertible preferred shares.

Creditors include Marubeni Corp., bondholder, banks and other trade creditors.

The approximately P39.5-billion debt that will be restructured is broken down as follows: bank debts of P8.67 billion and $105.5 million, convertible bonds worth $234.5 million, preferred shares worth P483.1 million, liabilities to other trade creditors worth $27.3 million and liability of Marubeni amounting to ¥31.288 billion.

It said that with regard to the 50 percent of debt owed to all the creditors, one Piltel convertible share will be issued for every P340-worth of debt.

Such Piltel convertible shares could immediately be exchanged for PLDT convertible preferred shares at the ratio of one PLDT convertible preferred share for every five Piltel convertible preferred shares.

"Thus, the PLDT convertible preferred shares will effectively be issued at P1,700 of Piltel debt per share," the company said.

PLDT common shares closed at P660 down P10, on Monday.

In the case of the bank debt, half of the remaining 50-percent debt will be replaced by a secured 10-year term loan with nominal amortizations made beginning the third year until the ninth year after which the balance of the loan will be paid in a lump sum at the end of the 10th year.

The remaining balance will be replaced by a secured amortizing 15-year loan.

Similarly, the convertible bondholders will exchange the remaining 50 percent of their exchange bonds for 15-year floating rate guaranteed amortized notes. Interest for the notes will be at three-month LIBOR plus one percent.

Other trade creditors will effectively receive the same terms as holders of the dollar-denominated bank debt.

The redeemable preferred shareholders will receive a 15-year term note facility with interest at the six-month Treasury-bill rate plus one percentage point, covering 50 percent of the redemption amount plus accrued and unpaid dividends.

Half of the Marubeni debt will also be restructured under the same amortization as the bank debt, with interest at Japanese LIBOR plus one percent.

Piltel ended five centavos higher at 49 centavos on Monday.