Salim group rushes sale to pay debt to Indon government

Hong Kong-based First Pacific Co. Ltd. is rushing to sell its Philippine interests, including its stakes in Philippine Long Distance Telephone Co. and Bonifacio Land Corp., before Sept. 30 this year to meet the Oct. 11 deadline set by the Indonesian government for the Salim family to pay part of its debts amounting to around 32.2 trillion rupiah (P179 billion or $3.6 billion) to the state.

This as PLDT challenged its parent firm First Pacific yesterday to make a presentation before the PLDT board to explain the deal and its plans for the company, employees and creditors, as well as the decision to sell to a competitor.

Informed sources from Indonesia revealed that the Salim group, controlling shareholder of First Pacific and comprised of Soedono Salim, Anthoni Salim, and Andre Salim, owes the Indonesian government around 53 trillion rupiah. Less the assets that have been turned over to the government, the debt is now down to Rp32.2 trillion of which Rp 2.2 trillion (P12.3 billion or $244 million) is immediately outstanding.

There are persistent speculations that the memorandum of agreement (MOA) between First Pacific and the Gokongwei group covering the sale of the former’s stakes in PLDT and BLC was done in haste as shown by the mention of JG Summit as a party to the transaction instead of the Gokongwei group only as intended.

The Salim group is relying heavily on the sale by First Pacific of its 24.4 percent stake in PLDT and 50.4 percent interest in BLC and dividends that will be distributed by First Pacific to its shareholders following the sale to pay of its debts.

It is selling its interest for around $920 million, of which $100 million is payable upon completion of the transaction.

Media reports from Indonesia said that Anthoni Salim, who offered to sell the First Pacific Philippine business interests to taipen John Gokongwei Jr., was called to a meeting by IBRA, the government agency tasked to investigate and sequester Salim’s alleged ill-gotten wealth, last July 11 to discuss a financial diligence of Salim’s assets which may include First Pacific, and his outstanding Rp32.3 trillion debt to the government.

In the July 11 meeting with IBRA, Salim reportedly agreed to pay the state an initial Rp 720 billion ($80 million or around P4 billion) on or before Oct. 11 this year.

IBRA was also reportedly disappointed by the low recovery rate Holdiko, the agency assigned to dispose of the assets turned over by the Salim family to IBRA, has achieved from Salim’s assets. There is speculation in Indonesia that Holdiko has been playing foul so that the Salim group, widely believed to be a crony for former Indonesian strongman Suharto, can resume control of its assets. "The latest speculation that Holdiko has not been very serious in dealing with Salim’s assets is the sale of PLDT," an Indonesia newspaper reported.

For its part, First Pacific, in its most recent disclosure, emphasized that the proposed transaction with the Gokongwei group will benefit PLDT by introducing a financially strong Filipino shareholder, dedicated to reducing debt and improving efficiencies.

It also pointed out that the transaction will benefit Fort Bonifacio, which is BLC’s main asset, by introducing an experienced and leading Filipino real estate developer wiho already has plans for a six-hectare mixed use development with the current project developer Fort Bonifacio Development Corp. in order to increase the chances for enhanced values that will benefit all owners of Global City properties as well as the creditors of Metro Pacific Corp., owner of BLC.

As to the benefit it will gain from the sale, First Pacific said that it will enable it to monetize a portion of the $1.3 billion (around P1,500 per share) that it has invested in PLDT since 1998.

It explained that the decision has been taken in the context that First Pacific has not realized any capital appreciation on its PLDT shares and has received no dividends since the first quarter of 2001, "with no apparent prospect of dividends until at least 2005."

It added that PLDT’s share price has over time declined from P457.5 per share when the transaction was first announced on June 5 to P325 per share today and blamed PLDT management’s uncooperative position for the depreciation of the stock.

First Pacific asked PLDT management, led by its chairman Antonio O. Cojuangco Jr. and president and CEO Manuel V. Pangilinan who are opposing the sale, to objectively evaluate the merits of the proposed transaction and clearly and "unambiguously explain the substantive matters if any that give PLDT management genuine concern as fiduciary representatives of the PLDT shareholders."

It emphasized that the MOA which represents the core focus of PLDT’s concerns is only a preliminary document and that final, definitive agreements containing the transaction’s complete details on parties, structure, and timing will replace the MOA.

In response, PLDT spokesman Butch Jimenez said in a statement: "How are we supposed to study the merits of the deal if First Pacific won’t give us any information about the deal itself. Do they expect us to base our decision on press releases, bits and pieces of information, and a hastily drafted MOA full of imperfections for which we had to sue just to obtain a copy of?"

PLDT has been questioning who the actual parties to the MOA are since JG Summit Holdings, in addition to the Gokongwei group/family, was mentioned as a signatory. The matter is currently being looked into by the Securities and Exchange Commission although the JG Summit board Wednesday approved the non-participation of the publicly-listed holding company of the Gokongwei family until certain issues pertaining to the MOA have been resolved.

Lawyer Perry Pe, personal counsel of John Gokongwei Jr. who signed on behalf of the Gokongwei group in the MOA, said whether or not other parties will join Mr. Gokongwei in the transaction remains to be seen. "Other matters have to be considered, such as the creation of the onshore and offshore companies as contained in the MOA. JG Summit, which is publicly listed, cannot just be dragged into this without having studied the matter thoroughly," he explained.

He also said that the corporate vehicle that will be used by the Gokongwei group to participate in the transaction has not yet been decided, even as he did not rule out the possibility of JG Summit participating in the near future.