PLDT needs JBIC board approval for $80-M loan

Unless the Japan Bank for international cooperation (JBIC) board finally approves its $80 million loan, the Phililippine Long Distance Telephone Co. (PLDT) may have difficulty meeting some of its financial obligations which are falling due very soon.

Highly placed sources told The STAR that the JBIC board has already stricken off its agenda twice the approval of the $80 million loan for PLDT, due to uncertainties that continue to hound its ownership. First Pacific Company Ltd. is selling its 24.4 percent stake in PLDT to the Gokongwei group but the latter’s management and board are opposing the move and PLDT chairman Antonio O. Cojuangco and president Manuel V. Pangilinan are exhausting all available means to stop the sale to a competitor and in fact want to buy out First Pacific’s stake.

This as PLDT designated Citigroup and ING Bank as joint lead arrangers and bookrunners for a $130-million multi-currency term loan facility. BNP Paribas and Mizuho have also joined as lead arrangers. Prior to yesterday’s launch of official syndication, PLDT officials said approximately two-thirds of the facility amount had already been committed by existing lenders. Financial closing is targetted by end of August.

This facility, which was launched yesterday, will refinance around half of the principal amounts outstanding under two existing loans falling due in 2003, one a 19 billion yen syndicated term loan and the other, a $103 million term loan, while the other half will be paid down. It is intended to be drawn in 2003 and will be amortized semi-annually beginning June 2004 with a financial maturity of December 2006.

PLDT finance officials are hoping that JBIC will finally push through with the approval before the end of the month when the board meets again, or they will experience problems paying some of the maturing obligations.

NTT Communications Corp., which has a 15-percent interest in PLDT, is lobbying hard for the approval of the JBIC loan, since NTT sponsored it in the first place. JBIC extends loans only to companies that are majority owned by Japanese companies and made an exception in the case of PLDT since that while the latter has a widely dispersed ownership, NTT is still the second biggest stakeholder next only to First Pacific and, therefore, has big say in how it should be managed.

In fact, PLDT board member Taketo Suzuki, who represents NTT in the board, met a few times with JBIC officials to follow up on the loan.

Sources explained that non-approval of the JBIC loan will also impact adversely on the release of the $149 million KfW/Hermes term loan refinancing facility.

PLDT management has been undertaking a comprehensive liability management program to address debt maturities in 2002 to 2004. So far, aside from the German KfW loan, PLDT was able to successfully raise $350 million from a successful notes issuance and bought back some of the bond issues due next year and in 2004 using part of the proceeds of the notes issuance.

The liability management exercise aims to term out about 50 percent of its $1.3 billion debts maturing between 2002 and 2004, and to reduce overall indebtedness resulting from improved operational efficiencies and stronger internal cash generation.

Meanwhile, PLDT and parent firm First Pacific continued yesterday with their word war following the latter’s claim that a provision in PLDT’s by-laws prohibiting the nominating and election of competitors to the PLDT board was approved without prior notice to and approval by the shareholders in a general meeting.

PLDT officials explained that the amended by laws of the company were duly adopted and approved by the board on March 20, 2001 pursuant to the authority delegated to it by the stockholders on April 15, 1953, with the said by-laws approved by the Securities and Exchange Commission on April 11, 2001.

The delegation of the power to amend the by-laws to the board of directors of a stock corporation is recognized and authorized under the Corporation Code.

Article 5, Section of PLDT’s amended by-laws provide for the disqualification or ineligibility of a person from being elected or nominated as a director of PLDT if such person is engaged in any business that competes with or is antagonistic to that of PLDT or its subsidiaries.

Officials also cited the ruling of the Supreme Court in the case filed by John Gokongwei Jr. against the SEC where the court noted that such disqualification is premised upon the principle that where the director is so employed in the service of a rival firm, he cannot serve both, but must betray one or the other."

The High Tribunal, in this case which prevented Gokongwei from being elected to the board of San Miguel Corp. said that electing a person representing a competitor or rival company‘ can bring about an illegal situation,’ even as it cited the constitutional and legal prohibition against combinations in restraint of trade or unfair competition.

While the Gokongwei group and First Pacific insist that neither Digitel, which is the second biggest landline telephone company in the country next to PLDT nor its parent firm JG Summit are involved in the sale of First Pacific’s stake in PLDT, the SEC is now studying the implications of JG Summit being mentioned as a signatory to the memorandum of agreement entered into between Gokongwei and First Pacific on the sale.