Capwire was responding to questions on the recent court decision calling for the telco to comply with the terms and conditions of the debt restructuring agreement signed with its consortium of creditors.
In September 2000, Capwire and its creditors agreed and signed the telco’s debt restructuring agreement. But during the year 2000, the entire telecommunications industry experienced drastic drops in accounting settlement rates of telecommunications services and rapid collection rate reduction driven by the intense competition resulting from the deregulation of the local telecommunications industry. The deterioration in rates seriously impeded Capwire’s ability to fully comply with the terms and conditions of the restructured debt agreement.
By February 2001, and after determining that cash flows would be lower than expected over the next four years, Capwire proposed a revised business plan that included the extension of full payment of its debts to 2011, resetting of value dates from June 30, 1999 to June 30, 2001 and coupled with a reduction of the interest rate cap from 15 percent to 12 percent. The revised plan also has Capwire proposing to further reduce expenses as well as introduce new services.
"We had actually hoped that the court would take into consideration the revised business plan. Unfortunately it didn’t, having considered only documents turned over by the Securities and Exchange Commission (SEC) in July of 2000," explained Joel C. Aguilar, chief finance officer and senior vice president of Capwire.
"The turnover to the Regional Trial Court (RTC) by the SEC was due to Securities Act of 2000 which took effect after June 2000 and which required regular courts to assume jurisdiction over intra-corporate disputes on cases involving suspension of payments and rehabilitation," Aguilar added.
The Capwire executive said the company has been operating under the revised business plan. Despite the slowdown in the telecommunications business, Aguilar said the company has managed to make interest payments to its creditors based on the revised plan. An additional P5-million payment was made to the creditors on March 7, 2002, he added.
Based on the revised business plan, Aguilar said, total unaudited net proceeds for the first half of fiscal year 2002 exceeded the company’s revenue projections based by 11 percent.
"Capwire has been able to meet its targets based on its revised business plan. It is unfortunate that our creditors have not been willing to listen," said Aguilar. "We believe our creditors will view us as continuing to deal in nothing less than good faith but they first need to reconsider the proposed amendments to the signed debt restructuring agreement. They will find that the revised business plan seeks to create a win-win situation for both the company and the consortium," he added.