Meralco creditors reject debt-equity swap proposal

Saying it is not necessary, creditors of Manila Electric Co. (Meralco) have rejected proposals for a debt-equity swap.

Omar Byron T. Mier, executive vice president of the Philippine National Bank (PNB), said restructuring of Meralco’s debts including interests is sufficient, and that the proposal is not necessary.

The creditors, headed by Citibank, have agreed to work for a restructuring of Meralco's P31-billion debt. "After all, they (Meralco) have the ability to pay for their principals without the restructuring," said one creditor.

Meralco has over P5 billion in debts with Citibank and P2 billion apiece with the Development Bank of the Philippines (DBP) and PNB.

The creditors agreed that three complementing factors have to be in place for a successful restructuring of Meralco’s debts.

First, the Supreme Court must immediately issue its decision on Meralco’s motion for reconsideration of the its earlier decision. The SC had earlier ruled that Meralco had overcharged its customers and that they (customers) must be refunded.

"The decision will likewise determine the amount to be refunded," Mier pointed out.

Second, the Energy Regulatory Commission (ERC) must grant Meralco‚s P0.30 per kilowatthour (kWh) rate hike petition, which will make them financially capable of initiating the refund.

Only then can the pool of creditors initiate the restructuring of the P31-billion debt.

"It is all inter-related," said DBP president and chief executive officer Simon Paterno referring to the rate hike, the refund and the determination of the amount involved in the overcharging.

Creditors likewise stressed that Meralco will not be required to pay the overcharged lump sum as it is perceived to create a financial strain on the Lopez-led electric utility company.