Sky, Home Cable commit $30M in fresh money

Leading Philippine cable television operators SkyCable and Home Cable yesterday formally committed to infuse $30 million or about P1.65 billion in new money in 60 days as part of an agreement with their creditors to jumpstart the restructuring of about P2.6 billion in combined debts, The STAR learned.

A memorandum of agreement (MOA) was signed yesterday afternoon between Sky Cable president Eugenio Lopez III and Home Cable president and Unilink chairman Ray Espinosa and a majority of their bank creditors which outlined the various commitments and conditions that will have to be met before the eventual restructuring of their debts.

The source revealed that the infusion of additional funds into Sky and Home will trigger the whole debt restructuring. "The Sky, Home banks just wanted to see the color of their (Sky and Home) money," the source said.

Sky Cable is owned by the Lopez group through Sky Vision While Home Cable is owned by the Philippine Long Distance Telephone Co. (PLDT) through Mediaquest/Unilink.

While the MOA did not specifically mention the source of the funds, sources privy to the discussions told The STAR that $20 million or about P1.1 billion will be sourced by ABS-CBN Broadcasting Corp., which like Sky Cable is owned by the Lopez group. The balance of $10 million will be sourced by both Sky and Home.

The signing of the MOA yesterday is seen as a major first step towards the eventual restructuring of around P2.6 billion in debts.

The money, which will be in the form of loans convertible to equity later, will be used to update interest payments to the banks and for use in operations to improve the viability of the cable business, as well as to complete the business plan and effect the merger of the two companies into Beyond Cable.

The STAR learned that part of the money might be used to allow Sky and Home to invest in addressable set-up boxes that are expected to minimize, if not totally eliminate, cable TV piracy. The boxes will also allow the two CATV operators, which account for about 80 percent of the market, to go into tiering (consisting of different price packages) of their services to subscribers.

Cable TV piracy is being blamed largely for the mounting losses of Sky and Home over the years. Another reason being cited by the two are the high cost of foreign programs and the huge debt burden. Sky and Home decided to merge to improve operational efficiencies, reduce redundancies in the laying out of infrastructure, and to have better bargaining power over foreign program providers.

As to the payment of the principal obligation, the banks and the two cable tv operators have agreed under the MOA to work out an extension of payments over a period of time, taking into account the business plan prepared by Sky and Home.

A debt restructuring agreement is also expected to pave the way for the complete consolidation/combination of market leaders Sky Cable and Home Cable soon.

As envisioned, holding company Beyond Cable will have indirect ownership in Home and Sky through the companies that respectively own them. In effect, Beyond will own 100 percent of Home and 100 percent of Sky.