RFM asks for more time to pay bonds

RFM Corporation and its wholly owned subsidiary, RFM Capital Ltd., announced yesterday that it would need more time to meet the redemption payments due May 30, 2001 on RFM Capital’s convertible bonds because of a temporary cashflow mismatch.

RFM is still pursuing several options for raising funds to meet this obligation, and expects to be able to conclude successfully this process within a reasonable time frame. Nonetheless, the company has been and will continue to be current in servicing the interest due on the bonds.

The bonds were issued in May 16, 1996 in the principal amount of $65 million, will mature in 2006 and pay interest at the annual rate of 2.75 percent. Among other terms, the holders of the outstanding bonds have the option to redeem their bonds on May 30, 2001 at the redemption price equal to 128.71 percent of the principal amount.

Earlier, RFM had disclosed its plan to meet the obligation through a combination of funds from the sale of certain assets, from new borrowings and from internally-generated cash. However, RFM had pointed out that the completion of the plans could be made only if key elements were to be finalized within this month, before the due date of the bond redemption.

The sale of certain assets is in line with RFM’s repositioning strategy which calls for exiting from non-core business, and focusing the group more on the branded, high-margin refreshments business, which will include softdrink, milk and juice, and ice cream.

Recently, RFM had sold its entire interest in Consumer Savings Bank to a commercial bank in the Philippines. It is also currently in negotiations for the sale of its stake in the semiconductor business. RFM is also exploring options to take in investors or strategic partners in its other food businesses, such as flour, chicken and meat, so as to achieve operation synergies or promote industry consolidation.

RFM has engaged JP Morgan as its financial advisor and the law firm of Shearman & Sterling as its international counsel to assist it with the process of discussing with the bondholders and arriving at a mutually beneficial arrangement.

In the meantime, while RFM pursues raising funds necessary to meet this obligation, the company and its subsidiaries will continue normal business operations and expect to satisfy ordinary course of business obligations on a timely basis.

RFM also expects to continue to service current interest due on all its financial obligations including bonds.