Benpres upbeat in debt restructuring deal before yearend

Benpres Holdings Corp., the umbrella unit of the Lopez Group of Companies expressed confidence yesterday it would be able to forge a debt restructuring plan with its creditors by the end of this year, top company officials said.

This as the company’s stockholders, in a special meeting yesterday, gave their board the "blanket authority" to negotiate with the creditors and expedite discussions for the eventual implementation of the debt program.

The stockholders’ consent will delegate to the board the full authority to negotiate and strike deals with their creditors without the need for prior stockholders’ approval, hence fasttracking the debt restructuring process.

"At this stage, an agreement has not been reached with creditors. We expect that discussions will intensify over the next few months whereupon, hopefully, an equitable plan could be agreed with the majority of Benpres creditors," company chairman Oscar Lopez said.

At their annual stockholders meeting in June last year, Benpres officials, in conjuction with financial adviser Credit Suisse First Boston (CSFB), presented a comprehensive Balance Sheet Management Plan (BSMP) to address a $597-million debt burden, accounted for mainly by losing subsidiaries Bayan Telecommunications Holdings and Maynilad Water Services Inc.

Under the BSMP, the company will seek the consent of its creditors for the restructuring of all liabilities, about 86 percent of which are dollar-denominated.

"Our problems at Maynilad and Meralco continue, with rate increases still pending after three years of waiting. Planned asset sales have not materialized and capital raisings for Benpres and the Group remain difficult in general," Lopez said.

He said that aside from the rescheduling of their debt payments, Benpres will also negotiate to amend the terms of their existing loans or credit agreements and "take any other action and matters which may be in the best interests and necessary for the rehabilitation and protection of Benpres and its stakeholders."

The Benpres chairman also hinted that if necessary, the company may also file a petition for rehabilitation with the courts or take other drastic measures available to a debtor, although such remedies could be considered as a last resort only if talks with the creditors fail.

He pointed out that the creditors themselves, in order to expedite discussions, have formed an informal overall committee and have appointed an independent accountant and legal team to assist in reviewing Benpres’ financial projections and legal proceedings.

"These initiatives, recommended by Benpres, are now being implemented by creditors and will serve to ensure that the debt restructuring reached with creditors is equitable, supported by the majority of Benpres’ creditors and protects the interests of Benpres’ shareholders and employees," Lopez added.

Since it presented the BSMP, Benpres has engaged in periodic meetings with majority of its creditors in Manila, Singapore and Hong Kong. Among the company’s creditors are local firms Union Bank, BPI, Equitable PCI Bank and First Metro Investment Corp., and foreign companies GE Equity, Citicorp, BNP Paribas, Citibank, Credit Lyonnais and JP Morgan-Chase Manhattan.

Only the Asian Infrastructure Fund (AIF) of the AIG Group, which has claims to some eight percent of Benpres’ debts, has sought court action to force Benpres to pay off about $45-million worth of convertible preferred shares in telecom unit BayanTel.

Last Jan. 24, AIG filed a motion for summary judgement in New York against Benpres and BayanTel, although Benpres officials said they will continue to contest the petition.

Benpres corporate secretary Enrique Quiason said even if AIG gets a favorable decision, it will still seek a similar judgement from a Philippine court since Benpres and BayanTel have no material assets in the US.

"They (AIG) may have to file another petition before a local court and it may take another year or more before it can be resolved, which, by that time, Benpres may have secured the consent of its other creditors," he added.

Quiason admitted that while the AIG case is causing distraction on the ongoing negotiations with the other creditors who are likely to resist allowing AIG to secure a preferential payment, he assured that Benpres remains steadfast in treating all its creditors on a pari passu or on equal basis.

"Benpres is prepared to take all actions which prevent creditors ‘queue jumping,’ as orderly restructuring process balances interests of all stakeholders and preserves residual equity value for shareholders," Quiason said.

In fact, as a gesture of good faith even while still in negotiations, Benpres has started last December the interim semi-annual payments of some $6.9 million for its various peso and dollar-denominated loans.

Benpres has proposed to make payments every six months at a rate of one percent above the 182-day Treasury Bill rate for the peso-denominated obligations and one percent above Libor (London Interbank Offer Rate) for the dollar loans.

The company will make its second and third interest payments each worth another $7 million in May and November this year.

As a result, Benpres has slashed some $50 million off its debt load, totaling $554.3 million as of this month. Out of these loans, the bulk or $210 million were from BayanTel; $151 million from Maynilad; and $192.7 million from the parent company.