ABS-CBN borrows $120M to pay debts, expand cable unit

ABS-CBN Broadcasting Corp. will raise $120 million through borrowing to pay off debts and fund cable operations of subsidiary Sky Vision Corp.

In a disclosure to the Philippine Stock Exchange (PSE), ABS-CBN vice-president and chief financial officer Randolph Estrellado said the company "is in the process of negotiating with a syndicate of private banks to refinance existing debts and fund further investments in cable TV operations."

Estrelado said the new loan will be secured by the company’s real property and certain equipment and other assets and will be guaranteed by ABS-CBN’s subsidiaries.

The company is resorting to borrowings so Sky Vision could finalize its merger with Philippine Long Distance Telephone Corp.’s Philippine Home Cable Holdings. The Lopez group will own two-thirds of the merged unit, Beyond Cable Holdings Inc. while PLDT will own the balance.

The money will also be used to acquire set-up boxes, which protect cable signals from piracy.

ABS-CBN said stable EBITDA margins will ensure its dominance in the highly competitive broadcasting industry. The cash pile also ensures that the company can settle all obligations due in the next 12 months.

Following a strong recovery last year, ABS-CBN saw its EBITDA (earnings before interest, taxes, depreciation and amortization) growing by 18 percent to P4.29 billion from P3.6 billion in 2002. This means that ABS-CBN is not solely dependent on advertising revenues which vary based on the economic cycle.

A significant portion of revenues come from cable subscription, both local and international.

EBITDA reflects the company’s ability to generate cash from operating its business units. This cash can be used for paying off debt and for investing in promising new projects

ABS-CBN attained the best EBITDA performance among Philippine broadcasters due to its diverse sources of revenues.

Estrellado said the impressive EBITDA performance was due to management’s determined efforts to "drive revenues, optimize operating efficiencies and closely manage capital spending."

ABS-CBN’s 16-year dominance of the industry stems from its ability to provide high quality content and make such content available on multiple platforms such as film, television, radio, publications and recording.

CLSA Asia-Pacific Markets analyst Alex Pomento said ABS-CBN’s growth in 2004 "would come from improving ad minutes due to campaign-related expenses and the likelihood that effective ad-rates would increase at least eight percent this year."

ABS-CBN reported a 500 percent increase in its net income last year to P1.01 billion from only P166 million in 2002, fueled by a double˜digit growth in revenues.

This year, ABS-CBN is allocating P1.5 billion for its capital expenditures, and film and programming rights acquisitions.

To further improve its profitability, ABS-CBN is looking at further expanding its operations in Australia and Canada in line with the continued development of its international business.